When supply chains tighten innovation scope: The moderating role of digital inclusive finance and supply chain finance

Using a panel of Chinese A-share listed firms from 2010–2023, we examine whether dependence on a small set of trading partners constrains firms’ technological portfolio expansion. We measure upstream and downstream dependence by the shares of purchases from the top suppliers and sales to the top customers, and quantify technological diversification with an entropy-based index derived from IPC-classified invention patents. Across firm and year fixed-effects specifications, greater concentration on either the supplier side or the customer side is associated with a narrower technological portfolio, indicating that partner dominance can compress firms’ innovation option set. Mechanism evidence indicates that concentrated supply chains tighten firms’ resource access by aggravating financing constraints, and they reduce the breadth of external knowledge intake, thereby weakening exploratory capacity across technological domains. We further show that financial infrastructures can partially offset these structural constraints. Higher levels of digital inclusive finance and more developed supply chain finance attenuate the negative association between concentration and technological diversification by opening alternative funding and coordination pathways. The dampening effect is especially salient for firms whose innovation strategies rely heavily on multi-source inputs, such as high-tech firms, and for firms lacking state-related resource advantages.