Supply network position, digital transformation and innovation performance: Evidence from listed Chinese manufacturing firms

Abstract

This study provides evidence for the supply network position influencing innovation performance and the moderating effect of digital transformation. Supply chain relationships have been evaluated in earlier research to demonstrate how concentrations of customers and suppliers may either favorably or adversely impact innovation. These metrics, however, only take into account how closely a firm is connected to its direct customers or suppliers. This study integrates the top five suppliers and customers of Chinese listed manufacturing firms and considers the relationship embeddedness of each firm’s direct customers and suppliers, as well as the structure embeddedness among the customers’ customers, customers’ suppliers, suppliers’ customers, and suppliers’ suppliers to reveal the true impact of supply chain relationships on innovation performance. The top five suppliers and consumers of each firm are chosen to build a supply network for each year using panel data of listed Chinese manufacturing firms from 2013 to 2020. Social network analysis is used to determine network centrality and structural holes. The results show that in the supply network, network centrality and structural holes are significantly negatively correlated with innovation performance, especially in small and medium-sized firms, non-state-owned firms, and firms in recession phase. According to the moderating effect model, digital transformation is an efficient way to reduce the negative effect of supply network position on innovation performance. The research results will further improve the supply network cooperation mechanism, which is of great significance for improving supply chain resilience and firms’ innovation.