Innovation Dynamics of Regional Banks Under Tech–Finance Integration Policies: Constraint-Induced Innovation for Business Sustainability

In an increasingly volatile global economy, countries are scaling up financial investment in innovation to sustain their competitive advantages. Financial institutions, specifically banks, are facing the challenge of aligning more radical financial policies for innovation with their own business sustainability, and innovation has thus become a key issue confronting banking. Existing studies mostly explain financial innovation from an external incentive perspective, leaving theoretical divergences and empirical paradoxes regarding core innovation dynamics unclear. Adopting a novel perspective of constraint-induced innovation theory, which challenges the dominant external pull view in the existing literature, this paper takes China’s tech–finance integration pilots as a quasi-natural experiment and uses a double/debiased machine learning model to identify causal effects by using panel data from 142 Chinese regional banks from 2008 to 2024. We find that tech–finance integration policies induce regional bank financial innovation through the dual channels of profitability and safety constraints. Banks must innovate to cope with the pressure exerted by new policies, and constraint-induced innovation is the main dynamic mechanism. In addition, financial innovation amplifies the policy’s impact on banks’ business sustainability. This study bridges the gap between existing theory and empirical evidence, extending the boundaries of financial innovation dynamic research.