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In an era of increasing supply chain disruptions, digital transformation has become essential for customer firms seeking to monitor suppliers and mitigate upstream risks. However, its impact on supplier risk-taking behaviour remains underexplored. Using a panel dataset of 2,025 customer-supplier dyads from Chinese listed firms (2007–2022), we demonstrate that customer digitisation significantly reduces supplier risk-taking. This effect is amplified when customers exhibit lower risk tolerance, when suppliers operate in non-high-tech industries, when customer concentration is higher, and when geographical asymmetries exist. Mechanism analysis indicates that customer digital transformation works by mitigating the bullwhip effect and intensifying supplier competition, thereby discouraging supplier risk-taking behaviour. We conclude with policy insights for digital adoption and data-sharing standards to curb upstream risk contagion.
Huang et al. (Thu,) studied this question.