Does Digital Inclusive Finance Promote Entrepreneurship? Evidence From Chinese Cities

Abstract

There is a significant interest among policymakers and academics about whether or not digital inclusive finance (DIF) has achieved its intended effect in promoting entrepreneurship in China. This paper addresses this question from both the theoretical and empirical perspectives. Based on the panel data of 284 prefecture-level cities from 2011 to 2019 in China, this paper empirically explores the influence and mechanism of DIF on urban entrepreneurship by employing the fixed effect model and the interactive fixed effects model. The results show that the aggregate index of DIF, coverage breadth index (CBI), usage depth index (UDI) and digitization-level index (DLI) of DIF do significantly promote entrepreneurship. Moreover, further tests of robustness and endogenous treatment also have proved incentive effect. DIF can promote entrepreneurship through three mechanisms: increasing government infrastructure investment, stimulating resident consumption and motivating enterprise innovation. Heterogeneity analysis shows that the effect of DIF in promoting entrepreneurship is more obvious in medium-sized enterprises, the western regions and regions with low levels of entrepreneurship. Therefore, the government needs to vigorously accelerate the development of DIF and create a good external environment for entrepreneurship. DIF policies should be regionally differentiated to more effectively achieve the entrepreneurial targets.

Research on the impact and mechanism of digital capabilities and digital finance on household wealth in the context of aging

“…The path coefficients were positive but insignificant in both eastern and central-western regions, suggesting that digital finance cannot significantly enhance entrepreneurial intentions (the path was removed from the formal model). Hypothesis 2b, 3b, and 4b were rejected, which is contrary to the previous studies' results on all ages sample [15] , [43] . According to 2019 CHFS data, fewer households used loans and most households with loans used offline bank loans instead of internet loans, which may be related to older people prefer robust business decisions.…”

“…Using CFPS data, Zhou and Chen (2021) found that digital finance contributed more to household wealth growth in the central and western regions [40] , while Lu and Wang (2021), using provincial panel data, found that digital financial inclusion had a greater poverty reduction effect in the eastern region compared to the relatively underdeveloped western region [41] . Regarding the other aspects of regional development, the role of digital finance in curbing the return to poverty is more significant for households in areas with higher levels of digital economy development [42] , while the innovation-driven effect of digital finance on China firms is more significant in areas with lower levels of entrepreneurship [43] .…”

Digital finance and M&As: An empirical study and mechanism analysis

“…Therefore, the promotion of the development of digital finance is important for narrowing the regional financial gap and giving Midwest companies more opportunities for achieving sustainable development and industrial transformation. The findings are also consistent with [20,[45][46][47][48][49]. [50] suggest that the financial system in China is dominated by the banking system which is controlled by the government indeed.…”

Does digital inclusive finance promote carbon emission reduction of enterprises

“…This study contributes significantly to the existing literature in three key ways. First, it enriches the current body of research on digital inclusive finance which predominantly concentrates on its economic and social promotion role, with some studies addressing its impact on carbon reduction: the study on digital inclusive finance and urban-rural income gap has explored how the incorporation of digital technology can improve the construction of digital infrastructure network, pinpoint financial needs, reduce the cost of financial services, and improve their availability, thus bridging the urban-rural income gap [ 6 , 7 ]; and the positive impact of digital inclusive financial services on household consumption [ 8 ], highlighting digital inclusive finance’s potential to alleviate entrepreneurs’ financing constraints, and Gao,Y et al (2022) analyzes the positive relationship between digital inclusive finance and entrepreneurship based on this mechanism [ 9 ]; Beyond this, certian studies have explored the carbon reduction effect of digital inclusive finance [ 10 – 14 ].…”