Digital transformation (DT) reshapes supply chain ecosystems and promotes inter-firm synergistic development. Using a sample of 2417 focal firm–partner dyads of Chinese A-share listed firms from 2013 to 2023, we employ regressions with industry and year fixed effects and mediation analysis to examine how focal firms’ DT affects partners’ internal control (IC) quality. We find that focal firms’ DT enhances partners’ IC quality, robust to various tests (e.g., IV, PSM). Mechanism analysis reveals two distinct pathways: transformation contagion (focal firms’ DT drives partners’ synchronized DT) and management spillover (focal firms’ DT-driven control activities exported to partners). Heterogeneity analysis shows that the positive transmission effect is stronger in geographically distant or low-concentration supply chain relationships, as well as for focal firms with greater market power. This study extends research on IC determinants beyond firm boundaries and shifts DT externality research from operational to governance outcomes, providing a governance-level synergistic pathway to supply chain sustainability.
Liu et al. (Thu,) studied this question.