ISSN: 2225-8329
Open access
There is a global consensus on the urgent need to reduce carbon emissions. However, integrating carbon emission reduction strategies within supply chains characterized by risk aversion and capital constraints has received limited scholarly attention. This study, considering a risk-neutral manufacturer, investigates financing strategies for risk-averse SME retailers in low-carbon supply chains. Three financing options are analyzed: bank credit financing (BCF), manufacturer credit financing (MCF), and mixed financing (MF). The results indicate that when the retailer's risk aversion level is sufficiently high, the retailer's optimal utility under MF outperforms BCF and MCF. Additionally, an increased MF ratio enhances the manufacturer’s utility but negatively impacts the retailer’s utility, depending on the retailer’s risk aversion level. By applying dynamic capabilities theory as an analytical framework, the study demonstrates how SME retailers’ financing strategies (BCF, MCF, MF) operationalize three core dynamic capabilities: sensing carbon transition risks, seizing hybrid financing opportunities, and transforming resources to balance financial stability with emission reduction. Specifically, MF exemplifies SME retailers' ability to dynamically reconfigure funding sources under risk aversion, turning financial constraints into drivers of green innovation. Through MF, SMEs signal their commitment to low-carbon transition, incentivizing manufacturers to reduce emissions via wholesale price adjustments—a cascading dynamic capability effect across the supply chain. Practically, the findings guide SMEs in selecting financing strategies under risk aversion and financial constraints. Policymakers can leverage these insights to design dynamic risk-sharing mechanisms that integrate financing flexibility with green transition goals.
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