Customer-driven value creation in the digital economy: Determining the role of customer firms’ digital transformation on supplier performance in China

Abstract

This study examines how customer firms’ digital transformation affects the performance and value creation of their suppliers in the Chinese context. We use text mining to construct digital transformation indicators for customer firms based on data from Chinese A-share-listed firms from 2011 to 2021. We find that customer firms’ digital transformation has a positive and significant impact on supplier performance, and this effect is robust to various sensitivity tests. We also find that customer firms’ digital transformation influences supplier performance through two mechanisms: demand push and innovation spillover. Moreover, the heterogeneity analysis reveals that the effect of customer firms’ digital transformation on supplier performance varies by different factors, such as geographic distance, customer concentration, ownership type, and industry type. This study contributes to the literature on supply chain value from a customer-driven perspective and provides practical implications for supply chain firms to leverage digital transformation to enhance their performance and competitive advantage.