Digital supply chains and firm market performance: Evidence from a quasi-natural experiment in China

In response to global supply chain restructuring in recent years, China has committed to promoting firm supply chain upgrades through digital technologies. In this paper, we employ China’s Supply Chain Innovation and Application policy (SCIA) as a quasi-natural experiment to examine how supply chain reform affects firms’ market performance. Analyzing data from Chinese A-share listed companies (2014–2022) through a difference-in-difference model, we find that: (1) supply chain reform significantly enhances firms’ operating income and product market performance; (2) the positive impact is more pronounced in firms with higher upstreamness, lower customer stability, those operating in non-high-tech manufacturing sectors, and those with lower initial digitalization levels; (3) the efficacy of supply chain reform operates through two primary mechanisms: optimization of internal resource allocation and reduction of external transaction costs; (4) such reform increases firms’ openness and improve overall performance. Our findings offer valuable policy implications for developing countries and transition economies seeking to modernize their supply chains and accelerate economic transformation in an increasingly digitalized global marketplace.