Diverging Incentives and Evolutionary Dynamics within Supply-Chain', System Dynamics Conference

The relationship between a supply-chain and a main contractor within a local cluster of production unveils elements of complexity. While fates of supply-chain and main contractor are often interlaced, as the relationship unfolds dynamically incentives may diverge dramatically. This paper addresses a dilemma main contractor faces in taking decisions concerning technology transfer towards local suppliers. On the one hand, main contractor has an incentive in transferring technology with the aim at increasing technological content of input supplied locally. On the other hand, as the technological content of the supplychain increases, local suppliers may have an incentive in diversifying their sales towards global clients thereby increasing their bargaining power. Grounding on formal modelling and computer simulation, this paper explores different scenario emerging by the matching of different policies of technology transfer and different attitudes of supply-chain towards diversification of sales towards global clients. We explore the circumstances in which cooperative behaviour leads to more efficient scenario than non-cooperative behaviours.