The impacts of digital transformation on firm performance in China: the moderating role of supply chain concentration

Abstract

ABSTRACTIn the era of Industry 4.0, digital transformation has become a key driver of corporate development. Despite its profound significance, there is a dearth of research examining its underlying influencing mechanisms. To fill this gap, this study investigates the impact of firms’ digital transformation on firm performance and explores the moderating role of supply chain concentration using a sample of Chinese listed firms from 2011 to 2021. Drawing on transaction cost and knowledge-based theories, digital technologies boost efficiency and flexibility, reduce transaction costs, and enable the leveraging of a diverse resource pool, which ultimately leads to improved performance among supply chain participants. The results indicate a positive contribution of digital transformation to firm performance in China. Notably, the relationship is moderated by supply chain concentration, with digital transformation exerting a more significant effect on firm performance in companies with low customer concentration and high supplier concentration.KEYWORDS: Digital transformationsupply chain concentrationcustomer concentrationsupplier concentrationmoderating effects Disclosure statementNo potential conflict of interest was reported by the author(s).Data availability statementThe data that support the findings of this study are openly available in China’s Stock Market and Accounting Research (CSMAR) database at https://www.gtarsc.com.Additional informationFundingThis paper was supported by the Research Project of Zhejiang Federation of Humanities and Social Sciences Circles [grant number 2024B049]. All errors remain the responsibility of the authors.