The influence of natural disasters on supply chain concentration: the moderating role of digital capability

Purpose Natural disasters impose substantial operational and strategic challenges on firms. Drawing on Resource Dependence Theory (RDT), this study examines how natural disasters (specifically, typhoons and earthquakes) affect firms' supply chain concentration and investigates the moderating role of digital capability in this relationship. Design/methodology/approach Using a panel of A-share-listed firms on the Shanghai and Shenzhen stock exchanges from 2010 to 2023, comprising 27,578 firm-year observations, we exploit a staggered difference-in-differences (DID) design to identify the causal effect of natural disasters on firms' supply chain concentration. Findings We find that firms exposed to natural disasters significantly reduce both supplier and customer concentration. Moreover, higher levels of digital capability strengthen the negative effect of natural disasters on supply chain concentration, suggesting that digital capabilities enhance firms' ability to reconfigure their supply chains in response to environmental shocks. These findings are robust to a series of robustness checks. Heterogeneity analyses further show that the effects vary systematically with key firm characteristics, including industry pollution intensity, ownership structure, financial constraints, and managerial optimism. Finally, analyses by disaster type reveal that typhoons significantly reduce both supplier and customer concentration, whereas earthquakes have no significant effect. Originality/value This study contributes to the literature by identifying natural disasters (typhoons vs. earthquakes) as an important environmental determinant of supply chain concentration and by highlighting digital capability as a key capability that enables firms to strategically reconfigure supply chain relationships in response to external disruptions.