How Does Downstream Customer SRDI “Little Giant” Certification Drive Supply Chain Diversification Among Upstream Suppliers? Evidence from China

Growing uncertainty in the external environment has heightened concerns about supply chain security and resilience. Existing studies mainly examine the effects of China’s Specialized, Refined, Distinctive, and Innovative (SRDI) “Little Giant” certification on certified firms themselves, while its implications for the supply chain configuration of connected firms remain less understood. Using the staggered timing of certification, this study uses customer–supplier relationship data from Chinese listed firms over the period 2012–2025 and employs a staggered difference-in-differences model to examine whether downstream customer certification is associated with changes in supply chain diversification among upstream suppliers. The results show that “Little Giant” certification significantly reduces the concentration of upstream suppliers’ major trading relationships, leading to a more dispersed distribution of transaction shares across major partners. This finding remains stable across a range of alternative specifications, while an interaction-weighted event-study analysis provides complementary evidence on heterogeneous treatment timing and dynamic patterns. The mechanism analysis provides suggestive evidence consistent with a reputation-related channel and operating-resource adjustment: certified customers are associated with greater positive media exposure for their suppliers and higher operating working capital investment, while changes in current assets provide complementary evidence of operating-resource adjustment. Further analysis indicates that the estimated association is more evident in procurement relationships than in sales relationships, although the difference between the two estimates is not statistically significant. The estimated association also tends to be stronger among suppliers that exhibited overinvestment before certification and those with larger pre-certification market shares. These findings extend research on the economic consequences of SRDI certification from certified firms to their supply chain partners and suggest that firm-targeted industrial policy may be associated with cross-firm adjustments in major trading relationships through existing customer–supplier linkages.