Unpacking digital economy effects: performance enhancement through supply chain risk management

Abstract

This study investigates the relationship between digital economy development and corporate financial performance using panel data from 21,989 Chinese listed firm observations. Employing instrumental variables, Heckman selection models, and propensity score matching to address endogeneity concerns, we find that digital economy development significantly enhances corporate financial performance. Mediation analysis reveals that supply chain risk reduction serves as a critical pathway through which digital economy development creates value, with the Sobel test confirming significant indirect effects alongside the direct performance benefits. Our heterogeneity analyses uncover striking contextual variations: non-state-owned enterprises benefit substantially from digital economy development while state-owned enterprises experience negative effects; smaller firms capture greater digital dividends than large corporations; and organizations in growth or decline phases show pronounced performance improvements compared to mature firms. These findings challenge universal conceptualizations of digital economy benefits, demonstrating that institutional structures, organizational scale, and life cycle stages fundamentally condition digital transformation effectiveness. By bridging digital economy and supply chain management literatures, this research provides a contextualized framework for understanding how organizations can strategically leverage digital capabilities to enhance financial outcomes through improved operational resilience.