Can digital transformation improve firm resilience to supply chain disruption? The role of diversification strategies

Our study investigates the role of digital transformation (DT) in promoting firm resilience to supply chain disruptions. Based on resource dependence theory (RDT) and anchored in the organizational structure design literature, we propose a moderating effect for diversification strategies, including sourcing diversification, business diversification, and geographic diversification. To verify this, we collect data based on a sample of 2,486 Chinese listed companies that experienced supply chain disruptions caused by COVID-19 in 2020, of which 1,716 companies implemented DT and 770 companies did not. The changes in firm resilience based on five operating performance metrics for the sample group (those firms implementing DT) are compared against a control group (those without implementing DT) of similar size and industry. The results show that, in terms of percentage of change in operating performance, firms implementing in DT are more resilient than those that do not. Moreover, the sourcing and geographic diversification strategies play a positive moderating role in the relationship between DT and firm resilience. Additionally, our findings partially support the view that business diversification plays a positive moderating role in our proposed relationship for a certain subsample. These results contribute to the DT-resilience literature by unlocking the value and potential of interplay between DT and different diversification strategies in building firm resilience, and underscore the importance of reducing dependence on external resources in the face of supply chain disruptions.