Abstract: Building a supply chain with strong innovation capabilities is a crucial strategic task for China during the “14th Five-Year Plan” period and beyond. Based on the data of supply chain innovation from listed companies, this study delves into the impact of supplier innovation on downstream customer innovation from both theories and experiences. The main findings are as follows: Firstly, suppliers have a certain leading advantage in innovation ability compared to downstream customers, which is reflected in the fact that their invention patent application time is generally earlier than that of downstream customers, and they have a higher number of invention patents in industries highly dependent on innovation driven development. Secondly, supplier innovation demonstrates significant spillover effects, significantly increasing the innovation output of downstream customers. After a series of endogeneity tests and other robustness tests, this conclusion still holds. Thirdly, supplier innovation contributes to promoting knowledge spillover, increasing cooperated innovation and enhancing the R&D efficiency of downstream customers, thereby increasing their innovation output. Fourthly, supplier innovation yields significant economic benefits, boosting the corporate value and growth prospects of the downstream customers. The above findings contribute to a deeper understanding of corporate innovation and supply chain collaboration, at the same time, offering new policy insights to promote the integration of supply chains and enhance innovation capabilities in China.

Key words: supply chain, innovation, spillover effects, downstream customer