How does digital transformation enhance firms’ effective investment? Evidence from supply chain risk and inclusiveness mechanisms

We use Chinese A-share listed firms (2002–2023) to examine whether digital transformation (DT) improves effective investment and through which supply-chain channels. DT significantly raises effective investment, with stronger effects for firms with more concentrated supply chains. Mechanism tests point to two complementary pathways: DT mitigates supply-chain disruption risk and supply–demand imbalance, easing capacity misallocation; and DT enhances verifiability and collaboration, extending trade credit terms (lower receivable/payable turnover), stabilizing partnerships, and increasing fixed-asset turnover. Overall, DT boosts capacity utilization and moves firms closer to optimal capacity.