The Correlation Between Enterprises’ Digital Transformation and Supply Chain Concentration

In the increasingly thriving digitalization external environment, sustaining competitive advantage in supply chains poses significant challenges for companies. Effective management of supplier and customer concentration is essential for maintaining this advantage during digital transformation. This study investigates the relationships between supplier concentration, customer concentration, and digital transformation of firms in the Chinese market context. Based on transaction cost theory and resource dependence theory, this study assumes that highly concentrated suppliers will hinder enterprises’ digital transformation. Grounded in bargaining power and operation management, it is proposed that successful digital transformation can reduce enterprises’ dependence on customers. Utilizing data from Chinese-listed A-share companies from 2010 to 2022, the study reveals the firms that may progress more slowly. Conversely, digital transformation effectively diversifies customer bases, strengthens customer relationships, and enhances risk management through a more resilient business model. The results provide important insights on how to enhance a company’s market competitiveness and innovation by reducing supplier concentration and implementing effective digital transformation.