Amidst rising uncertainty in the global economy, steadily expanding institutional openness and continuing to build pilot free trade zones are key measures for promoting reform through openness, smoothing the internal and external circulation of supply chains, and building a modern industrial system. This study employs a quasi-experimental design leveraging the establishment of free trade zones, utilizing data from A-share listed companies to investigate the eff ects of institutional openness on supply chain confi guration and the underlying mechanisms. The fi ndings reveal three key insights: Firstly, institutional openness signifi cantly mitigates supplier concentration, a result that is robust to various sensitivity analyses. Secondly, institutional openness fosters supplier diversification by ameliorating the business environment, enhancing supply chain effi ciency, and diminishing institutional transaction costs. Thirdly, supplier diversifi cation is more pronounced in regions with advanced digital economies, high market integration, and in the eastern regions of China, as well as among enterprises characterized by high levels of digital transformation, profi tability, and technological innovation. This research offers valuable implications for the construction of a unified national market, the smooth operation of domestic and international dual circulation, and the enhancement of supply chain and industrial chain security and stability.