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Unveiling the role of digital finance in technological catch-up: A multisector growth model with firm-level evidence

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  • Xu, Hao

Abstract

This study develops a multisector endogenous growth model to examine how digital finance affects latecomer firms' technological catch-up and empirically tests this relationship using Chinese firm-level panel data from 2011 to 2023. The results show that digital finance promotes catch-up by reducing financial capital misallocation, enhancing knowledge spillover, and strengthening entrepreneurial innovation spirit. This effect is stronger for latecomer firms operating in industries where frontier firms hold greater structural advantages, those facing a larger frontier knowledge gap, those emphasizing substantive innovation strategies, and those in regions with more developed digital industries. In addition, intellectual property protection exerts a nonlinear moderating effect, first reinforcing and then diminishing digital finance's influence on technological catch-up. Overall, the findings deepen understanding of digital finance's role and offer policy insights for building a fair innovation ecosystem that supports inclusive growth.

Suggested Citation

  • Xu, Hao, 2026. "Unveiling the role of digital finance in technological catch-up: A multisector growth model with firm-level evidence," Economic Modelling, Elsevier, vol. 155(C).
    • Handle: RePEc:eee:ecmode:v:155:y:2026:i:c:s0264999325004328
    DOI: 10.1016/j.econmod.2025.107437
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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D30 - Microeconomics - - Distribution - - - General
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets

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