Can digital technologies mitigate supply chain volatility? Empirical evidence from China

Abstract

ABSTRACT Digital technologies, such as AI, big data, blockchain, cloud computing, Internet of Things (IoT) and VR/AR, have been widely applied in firms and have greatly transformed supply chain management. We collect the annual reports of Chinese listed companies and adopt a machine learning algorithm to construct variables proxying for firms’ adoption of digital technologies, which we call digitalisation. Given the importance of mitigating supply chain volatility nowadays, we empirically show that a higher level of digitalisation can lead to a significant decrease in supply chain volatility measured by the bullwhip effect. We demonstrate that emerging digital technologies are effective in reducing supply chain volatility, among which the adoption of blockchain exhibits the largest impact. We further investigate whether the mitigating effect of digitalisation varies across different firm characteristics. Specifically, we find that mitigation is stronger for firms with more dispersed supply chain networks and a higher level of managerial expertise.