Trade Credit, Digital Penetration, and Green Innovation: Micro-Level Evidence from Supply Chain Networks

This study examines how trade credit influence firm green innovation using data from Chinese A-share listed companies (2012–2022). The results show that trade credit significantly promotes green innovation by improving information transparency, human capital structure and executive awareness in the internal organization of firms. Digital penetration, as a key channel to empower the impact of trade credit, can improve the efficiency of supply chain credit management internally and expand financing sources externally. Supply chain structure has an asymmetric impact on the green innovation effect of trade credit. The heterogeneity analysis finds that the green innovation effect of trade credit is more pronounced in Non-SOEs, technology-intensive industries. These results remain robust when tested with instrumental variables such as vertical integration and dual machine learning methods. Our results provide important implications for policy makers seeking to use market-based financing tools to support sustainable corporate green transformation.