Coordinating Innovation between Manufacturer and Indirect Raw Material Supplier

In this paper, we consider a manufacturer-supplier chain situation in which the manufacturer coordinates, e.g., supports, its supplier's innovation that can eventually lead to supply cost reduction. Developing some mathematical models, we show that sharing innovation cost has a better coordination effect, and manufacturer can share a part of innovation cost when the innovation coefficient is lager, but the pollution treatment cost of indirect material can not affect the ecological innovation level of supplier. Manufacturer can adopt sharing profit model to encourage supplier to solve the question of increased treatment costs.