Digital transformation and supply chain concentration: evidence from China

Excessive supply chain concentration (SCC) introduces various risks, and the factors contributing to SCC are complex and have been rarely explored. This study examines the economic impact of digital transformation on supply chains by analysing data from China's A-share listed companies (2010–2021) using regression models. The findings demonstrate that digital transformation significantly reduces supply chain concentration and increases the firms' influence within the supply chain. The mechanism analysis shows that digital transformation makes firms more attractive to suppliers and customers, eases financing constraints, boosts firm reputation, and reduces SCC. The impact is more pronounced in firms facing higher environmental uncertainty or those positioned upstream in the supply chain. Except for blockchain, all five dimensions of digital transformation help to reduce SCC, thereby improving total factor productivity and economic growth. Digital transformation also creates a spillover effect, raising expectations for digital transformation and productivity among suppliers and customers. These findings have significant implications for understanding digital transformation practices and advancing supply chain management. The conclusions remain robust after various tests, including changes to the measures of variables and controls for reverse causality using lagged treatment and instrumental variables.