Green transformation along the supply chain: Spillover effects from backward vertical partnerships

This paper employs natural language processing to construct a firm-level green-transition score and examines how downstream companies’ greening shapes upstream suppliers’ environmental upgrading. Our findings demonstrate that downstream firms’ green transition exerts significant positive spillovers on upstream suppliers’ environmental practices. This conclusion remains robust across multiple identification strategies, including instrumental variable estimation, difference-in-differences analysis and Heckman two-step selection correction. Heterogeneity analysis reveals that these spillover effects are amplified under three conditions: (1) strong supplier absorptive capacity, (2) narrow green-technology gaps between buyers and suppliers and (3) large market size in the buyer’s regional market. Mechanism tests indicate that downstream firms’ green transformation facilitates upstream suppliers’ environmental upgrading through two channels: knowledge–technology transfer and norm diffusion of environmental standards. This study advances the literature on corporate greening and supply chain coordination and provides policy levers to foster integration and amplify green spillovers.