Should multinational firms implement blockchain to provide quality verification?

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Should multinational firms implement blockchain to provide quality verification?

Niu, Baozhuang / Mu, Zihao / Cao, Bin / Gao, Jie

Highlights • E-tailers selling global brand products always benefit from blockchain as quality verification. • Blockchain will increase the MNF’s wholesaling profit, but reduces the benefits from retailing and tax-planning. • MNF’s participation decisions are influenced by competition and tax disparity between tax jurisdictions. • Tariff and blockchain cost hinder the MNF from participating in blockchain.

Abstract The e-tailers selling global brands’ products on cross-border e-commerce platforms have been suffering from low-quality image. To solve this problem, some platforms (e.g., eBay, Lazada, and Tmall Global) have utilized blockchain for quality verification that creates customers’ trust and guarantees the products’ quality. It is widely acknowledged that the operations of blockchain require all supply chain parties’ participation. Therefore, whether the owners of the global brands have incentives to verify the quality and origin of the goods via blockchain can be critical, especially when the brand-owners are multinational firms (MNFs) owning retail divisions in the same market. In this paper, we study a co-opetitive supply chain consisting of an MNF located in high tax country/region and an e-tailer sourcing from the MNF and reselling the goods. The e-tailer competes with the MNF’s retail division in a low-tax country/region. We find that, blockchain is a double-edged sword for the MNF. It increases the MNF’s wholesaling profit, but reduces the MNF’s retailing profit and tax-planning benefit. Consequently, the MNF will not participate in blockchain if the tax disparity is large and the downstream competition is fierce.