Does Supply-Chain Digitalization Policy Reshape Supplier Selection? Evidence from China’s Supply Chain Innovation and Application Pilot Program

Although government-directed supply-chain programs increasingly seek to enhance firms’ operational capabilities, their downstream effects on supplier selection—and the firm-level conditions that shape these effects—remain underexplored. Using China’s 2018 Supply Chain Innovation and Application Pilot Program (SCIAPP) as a quasi-natural experiment, we exploit the staggered designation of pilot firms and apply a difference-in-differences framework to a panel of Chinese A-share-listed firms from 2014 to 2023. This design allows us to examine how a government-led supply-chain digitalization initiative reshapes firms’ supplier selection decisions. We find that the SCIAPP designation increases the share of newly added suppliers whose AI capability exceeds the industry-year median by approximately 3.2 percentage points. Event-study estimates provide no evidence of differential pre-designation trends and show that the effect strengthens progressively during the post-treatment period. This temporal pattern suggests a gradual reorientation of procurement routines rather than an immediate or merely ceremonial response to program designation. The effect is weaker among firms with a stronger pre-existing internal AI orientation, indicating that the program primarily influences firms that have not yet incorporated AI capability into their supplier evaluation criteria. Heterogeneity analyses further show that the effect is more pronounced among firms with stronger general digital capabilities, non-manufacturing firms, and smaller firms—contexts in which the capacity to identify and integrate AI-capable suppliers, or the dependence on suppliers’ external AI resources, is relatively high. These findings extend the supply-chain digitalization literature from intraorganizational capability upgrading to interorganizational relationship formation and clarify how public digitalization policy can promote sustainable supply-chain realignment by encouraging firms to select technologically capable suppliers.