In the rapidly evolving landscape of global economics, the digital transformation of supply chains emerges as a pivotal factor influencing productivity and innovation. A new comprehensive study focusing on China’s A-share listed companies from 2007 to 2022 reveals how digital advancements in upstream and downstream supply chain enterprises critically affect midstream firms’ total factor productivity (MTFP). This empirical analysis not only underscores the positive spillover effects of digital integration but also delineates the underlying mechanisms through technological progress and resource optimization. The findings carry profound implications for policymakers and industry leaders striving for high-quality economic growth in an increasingly digitalized marketplace.
At the heart of the investigation lies the essential question: How does the digital transformation of supply chain partners impact midstream enterprises’ efficiency and innovation capacity? Utilizing extensive data from Chinese listed companies, the researchers identify that upstream and downstream digital upgrades substantially enhance MTFP in midstream enterprises. This result remains robust even after rigorous methods to control for endogeneity, addressing concerns about causality and ensuring that the documented relationships reflect genuine spillover effects rather than coincidental correlations.
The study reveals two primary pathways through which digital transformation stimulates productivity growth. First, technological progress is significantly amplified due to enhanced innovation capabilities. Digital adoption by supply chain partners increases the inflow of cutting-edge technologies, leading to higher innovation input and improved quality of innovation outputs. Midstream firms benefit from the diffusion of digital know-how, which supports process optimization, product development, and ultimately boosts productivity levels beyond mere incremental improvements.
Second, the transformation facilitates more efficient factor reallocation. With digital tools enabling sophisticated data analytics and real-time monitoring, enterprises optimize their capital allocation, directing investments to the most promising projects and assets. Likewise, labor structures become more adaptable and responsive thanks to flexible workforce deployment strategies, including remote collaboration and inter-company labor mobility. These changes ensure that both human and financial resources are utilized with maximal efficiency, contributing to the cumulative rise in MTFP.
Geographic and industrial contexts further nuance the impact of digital transformation within the supply chain. Notably, the study finds that when suppliers and customers operate in different provinces, the positive influence on midstream firms’ productivity is heightened. This counterintuitive finding suggests that digital tools bridge regional divides more effectively than traditional supply chain management practices, fostering knowledge transfer and coordination across spatial boundaries. Similarly, the benefits are more pronounced when enterprises belong to different industries, indicating that cross-sectoral digital integration catalyzes innovation through diverse perspectives and expertise.
Additionally, the level of supply chain concentration plays a crucial role. Higher concentration implies more significant leverage and influence of leading firms—when these key players undergo digital transformation, their increased efficiency and innovation cascade through the supply chain, creating amplified benefits for midstream enterprises. This dynamic underscores the strategic importance of fostering digital adoption among industry leaders to drive comprehensive productivity enhancements.
Given the empirical evidence, the study proposes a multi-tiered approach to harness the full potential of digital transformation within supply chains. Governments have a critical role in establishing robust digital infrastructures, particularly in underdeveloped areas, to ensure equitable access to digital platforms and tools. Investments in broadband, data centers, and cloud computing resources form the backbone upon which corporate digitalization and supply chain efficiency improvements rely. Such infrastructure development becomes a catalyst for bridging the digital divide and unlocking economic potential nationwide.
Furthermore, policymakers are encouraged to build high-quality supply chain ecosystems through fiscal incentives such as tax breaks, subsidies, and targeted support for research and development. These measures lower the barriers to digital adoption, especially for small and medium enterprises that often face resource constraints. Creating collaborative platforms for information sharing and promoting supply chain-specific financial services can further enhance trust and operational efficiency, fostering a culture of innovation and seamless integration.
Tailored regulatory strategies are also essential, particularly given the heterogeneity across industries and regions. Cross-industry supply chains warrant policies promoting partnerships between manufacturing entities and information technology firms, accelerating the digital integration required for smart manufacturing and Industry 4.0 initiatives. Industries characterized by tight supply chain dependencies benefit from encouragement of leading enterprises to spearhead transformation efforts, setting benchmarks and driving adoption among downstream and upstream firms.
From the enterprise perspective, midstream companies need to leverage the innovation spillovers generated by their digitalized partners. Strengthening collaboration through data and technology sharing enhances overall supply chain capabilities and accelerates the generation of disruptive innovations. Embracing digital management systems and advanced analytics optimizes business processes and creates competitive advantages that are difficult for less integrated firms to replicate.
Moreover, optimizing resource allocation remains paramount. Firms should capitalize on government-backed platforms and tools, such as big data analytics, to refine their capital expenditures and improve financial decision-making. Investments in workforce training through online education platforms enhance employee skills aligned with digital competencies. Flexible labor arrangements, including remote work and inter-company mobility, increase agility and responsiveness to fluctuating market demands, boosting overall labor productivity.
Strategic alignment with supply chain characteristics is necessary to maximize digital transformation benefits. Companies operating in geographically distant networks should prioritize digital communication and logistics innovations to counteract coordination challenges. Industry diversity calls for differentiated approaches—manufacturers may focus on smart equipment and automation, while service industry actors innovate digital service models to enhance customer engagement and operational efficiency. Enterprises in less supply chain-dependent sectors must cultivate long-term partnerships and adopt standardized technologies to sustain competitive edges.
Despite these impactful findings, the research acknowledges important limitations warranting future inquiry. The exclusive focus on publicly listed enterprises omits insights from non-listed companies, which constitute significant portions of supply chains, particularly small and medium enterprises. Incorporating data from these players would yield a more holistic understanding of the digital transformation’s reach and impact across different firm sizes and market segments.
Methodologically, the study relies on textual analysis of corporate annual reports to gauge digital transformation levels. While innovative, this approach is indirect and may not capture nuances such as data capital accumulation or the specific nature of digital assets. Future studies employing granular accounting of digital investments and detailed metrics of data asset valuation could provide richer insights into how these intangible assets influence productivity.
Additionally, supply chain complexity is simplified due to disclosure constraints, as listed companies report only their top five suppliers and customers. Real-world supply chains are intricate networks with multiple tiers and cross-links, where digital transformation effects diffuse through numerous channels. Further research incorporating detailed mapping of supply chain interconnectivity, evolutionary dynamics, and digitalization across tiers will deepen our comprehension of spillover mechanisms.
In sum, this groundbreaking study situates digital transformation as a critical driver of productivity enhancement in midstream enterprises through supply chain spillovers. By elucidating the technological and resource reallocation pathways, and emphasizing contextual factors such as geography and industry diversity, it provides a nuanced roadmap for policymakers and business leaders. The pursuit of digital integration is not merely a technological upgrade but a strategic imperative for achieving sustainable, high-quality economic growth in an interconnected global economy.
As countries and companies confront the challenges of the digital age, harnessing supply chain digital transformation offers a powerful lever for innovation and competitiveness. Coordinated efforts between governments and enterprises, informed by data-driven research, can unlock vast untapped productivity potential. This study serves as a timely and vital contribution to the ongoing discourse, suggesting that the future of economic resilience hinges on embracing and accelerating the digital revolution across all layers of the supply chain network.
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Zheng, Y., Peng, Y., Wang, W. et al. Promotion or hindrance? Digital transformation of the supply chain and total factor productivity of midstream enterprises. Humanit Soc Sci Commun 12, 1492 (2025). https://doi.org/10.1057/s41599-025-05426-2
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