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

In 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.