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Quantity or quality: Novel insights into the impact of digital finance on innovation

Author

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  • Zhu, Xiaoke
  • Wu, Hanqi
  • Deng, Qiyun

Abstract

Despite prior literature shedding light on the role of digital finance in enhancing innovation quantity, research on whether and how it influences innovation quality remains limited. To address this gap, this study investigates the causal relationship between digital finance and the innovation performance of manufacturing enterprises, and identifies the inclusive effects of digital finance in China. We provide compelling evidence that digital finance generates significantly positive effects on innovation performance, encompassing both quantity and quality dimensions. Mechanism analyses demonstrate that financial constraints serve as a potential channel through which digital finance operates. We also observe the inclusive effects of digital finance on innovation performance. Specifically, the innovation improvements induced by digital finance are more pronounced for small and medium-sized enterprises (SMEs) and state-owned enterprises (SOEs).

Suggested Citation

  • Zhu, Xiaoke & Wu, Hanqi & Deng, Qiyun, 2024. "Quantity or quality: Novel insights into the impact of digital finance on innovation," Finance Research Letters, Elsevier, vol. 65(C).
    • Handle: RePEc:eee:finlet:v:65:y:2024:i:c:s1544612324006330
    DOI: 10.1016/j.frl.2024.105603
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    References listed on IDEAS

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    Cited by:

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    2. Min Jiang & Wei Zhou & Jiani Zong, 2025. "The role of digital finance on FDI inflow: facilitator or inhibitor?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 161(3), pages 1113-1138, August.
    3. Fang, Yinhai & Liu, Zhihui, 2025. "Can digital finance enhance enterprise research and development innovation? The mediating role of dual consumption behavior transformation," Finance Research Letters, Elsevier, vol. 71(C).
    4. Wang, Haoran & Ye, Lei & Zhang, Rongxin & Bao, Ziru, 2025. "The effect of digital inclusive finance on corporate technological innovation: A multilevel approach," Finance Research Letters, Elsevier, vol. 85(PD).
    5. Sun, Yaoxin, 2025. "A study of the impact of digital finance on the economic development of Latin American countries," International Review of Financial Analysis, Elsevier, vol. 107(C).
    6. Wei, Danqi & Ahmad, Fayyaz & Chandio, Abbas Ali & Khan, Irfan, 2024. "Digital financial inclusion role to promote renewable energy technology innovation in Chinese prefectural cities: Moderating role of environmental governance," Renewable Energy, Elsevier, vol. 237(PB).

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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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