Can the development of digital finance stimulate enterprise innovation? Empirical evidence from China

ABSTRACTBased on the data of China A-share listed enterprises, this paper examines the actual effect and mechanism of the development of digital finance on different innovation behaviors of enterprises, by using the panel data model and regression-based mediation analysis. It is found that the development of digital finance not only promotes the R&D investment of enterprises but also improves the quantity and quality of enterprise innovation output. The incentive effect of digital finance on enterprise R&D investment is stronger than that on innovation output, while the incentive effect of digital finance on enterprise breakthrough innovation is stronger than that of incremental innovation. Both the 'broadening' and the 'deepening' of digital finance have a significant positive effect on enterprise innovation, while the 'digitalization degree' of digital finance has no significant effect on enterprise innovation, and even may hinder the improvement of innovation quality. The incentive effect of digital finance on the innovation output of state-owned enterprises is reflected in 'quantity', while the incentive effect on innovation of non-state-owned enterprises is reflected in 'quality'. Digital finance can stimulate enterprise innovation by easing the financing constraints of enterprises, optimizing the government subsidy system, and improving the business environment.KEYWORDS: Digital financeenterprise innovationinnovation qualitybusiness environmentgovernment subsidies Disclosure statementNo potential conflict of interest was reported by the author(s).Additional informationFundingThis work was supported by Shandong Provincial Natural Science Foundation [Grant Number ZR2023MG075]; National Planning Office of Philosophy and Social Sciences of China [Grant Number 20FJYB017].