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Will Digital Inclusive Finance Improve the Quality and Quantity of SMEs’ Green Innovation?

Author

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  • Yan Yao

    (School of Management, Hechuan B Campus, Chongqing College of International Business and Economics, Hechuan, Chongqing 401520, China)

  • Zihong Ma

    (School of Economics, Kunming Chenggong Campus, Yunnan University, Kunming 650500, China)

Abstract

Whether SMEs can become a significant player in green innovation and reshape the green innovation landscape in China largely depends on their ability to effectively address the lack of momentum for green innovation among SMEs. Utilizing data from China’s SMEs listed on the growth enterprise market between 2011 and 2022, this study empirically examines the effects and underlying mechanisms of digital financial inclusion on green innovation in SMEs, considering both the financial market supply and corporate financing constraints. The results indicate that digital inclusive finance significantly enhances both the quantity and quality of green innovation in SMEs. Moreover, digital financial inclusion particularly improves the quality and quantity of green innovation in SMEs with strong ESG performance and high equity concentration, compared to those with weaker ESG performance and lower equity concentration. Heterogeneity analysis reveals that digital inclusive finance can improve the quality and quantity of state-owned enterprises and enterprises in the eastern region. Still, it has no significant impact on the quantity of green innovation for enterprises in the central and western regions. Regarding the impact mechanism, digital inclusive finance encourages SMEs to engage proactively in green innovation by mitigating financing constraints and increasing R&D investments. The findings of this paper not only reveal how SMEs can overcome the restrictive mechanisms of green innovation through digital inclusive finance, but also provide critical insights for improving the imbalance in the structure of green innovation within China.

Suggested Citation

  • Yan Yao & Zihong Ma, 2025. "Will Digital Inclusive Finance Improve the Quality and Quantity of SMEs’ Green Innovation?," Sustainability, MDPI, vol. 17(6), pages 1-19, March.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:6:p:2446-:d:1609752
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    References listed on IDEAS

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