Does digital finance favor firms in supply chains? Roles of green innovation and bargaining power

In the digital economy era, the disruptive technologies have boomed and reshaped firms in supply chains by finance digitalization towards a more sustainable way, while how digital finance (DF) affects firms’ performance in supply chains remains still unclear. Meanwhile, the balance between environmental protection and economic benefits has become pivotal for firms to achieve sustainable development. As an effective means to promote green development, green innovation (GI) can provide opportunities for firms to establish a good image and gain competitive advantages. Besides, bargaining power (BP) determines the firms’ profit allocation ratio in the supply chain. Firms with higher bargaining power can pressure suppliers to improve product quality or reduce wholesale price, and thus enhance corporate profits. Given that these two variables are crucial for stimulating firms’ development in supply chains from a long-term perspective, we aim to investigate how these two variables are affected by DF and the influence mechanisms of DF on firm performance based on the data of Chinese listed companies from 2011 to 2018. Results indicate that DF can be regarded as a useful tool for firms to improve corporate performance. We adopt instrumental variable method to solve potential endogeneity concerns, and conduct a series of robustness tests to ensure the reliability of the findings. We also find DF can significantly enhance GI and BP, which in turn improve firm performance in supply chains. This paper advances the literature on innovation and purchasing management by drawing attention to the potential role of DF and by shedding new light on how DF contributes to sustainable development of firms, thus providing managerial insights for governments, firms, financial institutions to develop digital technologies and ensure the healthy development of firms in the supply chains.