Digitalization and Supply Chain Carbon Performance: The Role of Focal Firms

This study explores how digitalization by focal firms affects carbon performance across the entire supply chain, advancing the literature by adopting a holistic supply chain perspective rather than a single-firm lens. We further draw on dynamic capability theory to explain the mechanisms through which digitalization enhances supply chain carbon performance. Based on an unbalanced panel dataset of Chinese listed firms from 2008 to 2022, we construct a three-tier supply chain panel linking upstream, focal, and downstream firms. The benchmark regression results show that focal firm digitalization significantly enhances overall supply chain carbon performance. Mechanism analyses identify two critical transmission channels: (1) optimizing supply chain resource allocation efficiency, through improved inventory turnover and strengthened supply chain finance; and (2) enabling collaborative technological upgrading, by enhancing the total factor productivity of upstream and downstream partners. Further heterogeneity analysis reveals that the effect of digitalization on improving carbon performance is more pronounced in regions with stronger environmental regulation and in non-regulated industries. In addition, we analyze the moderating role of the Supply-Chain Pilot-Cities Program. The findings provide practical insights for firm managers globally seeking to leverage digitalization for supply chain decarbonization and for policymakers across jurisdictions aiming to design supportive mechanisms that facilitate digital and green integration.