Digital transformation and customer enterprise innovation - From the perspective of supply chain spillover effects

• There is a positive relationship between supplier' enterprise digital transformation and customer' enterprise innovation, and this conclusion remains valid after a series of robustness tests. • Compared to state-owned enterprises, the digital transformation of non-state-owned supplier firms has a greater positive impact on customer' enterprise innovation. Likewise, compared to non-growth-stage firms, the digital transformation of growth-stage supplier firms has a stronger promoting effect on customer' enterprise innovation. • Supplier' digital transformation can foster customer' enterprise innovation through two main channels: by promoting supply chain finance and by reducing the supply-demand coordination costs. • Supplier' digital transformation can effectively enhance the innovation efficiency and innovation quality of customer firms. This study employs a sample of A-share listed companies spanning 2007 to 2022 to theoretically analyze and empirically examine the impact and mechanisms through which suppliers' digital transformation influences innovation in customer enterprises. The results demonstrate that suppliers' digital transformation significantly enhances innovation outcomes among downstream customers. Mechanism analysis reveals that this effect operates through two distinct channels: first, by promoting supply chain financial development, and second, by reducing supply-demand coordination costs through supply chain spillover effects. These findings remain robust to a battery of sensitivity tests. Further analysis indicates that suppliers' digital transformation not only improves innovation efficiency but also elevates innovation quality in customer enterprises.