Navigating Ethical Dilemmas in Supply Chain Finance: The Interplay Between Digitalization and Cultural Congruence

Abstract

In an era where financial resilience and ethical integrity are pivotal to supply chain success, this study explores how firms can harness digitalization capability to enhance supply chain finance (SCF) performance, with a particular emphasis on its role in promoting supply chain transparency (SCT) and mitigating partner firms' unethical behavior. Specifically, we develop a theoretical model based on the organizational information processing theory and social exchange theory and test it by employing partial least squares structural equation modeling analysis on data from 172 Chinese manufacturing firms. The results reveal that firms' digitalization capability advantage (DCA) is an effective means to achieve the fit between information processing needs and capabilities in improving SCT and reducing the unethical behavior of partner firms. This fit is further strengthened when firms and their partners exhibit a higher level of cultural congruence. Additionally, the study demonstrates that improving SCT and mitigating unethical behavior are crucial mechanisms that facilitate reciprocal resource interactions, fostering high-quality social relationships between focal firms and their partners, and ultimately contributing to enhanced SCF performance. Overall, this study provides a clear and theoretically grounded explanation of how DCA can be utilized to enhance supply chain operations and SCF performance.