The Role of Digital Inclusive Finance in Green Innovation

As environmental issues become increasingly severe, green innovation has emerged as a cornerstone in advancing environmental sustainability and driving a comprehensive green transition, paving the way for a greener, healthier future. Digital inclusive finance has garnered substantial attention as a potential enabler of green innovation. This paper aims to uncover the implications of digital inclusive finance for green innovation, while examining the underlying mechanisms of action. Drawing on data collected from Chinese A-share listed companies from 2014 to 2019, we conduct a multidimensional fixed-effect model analysis. Our empirical findings reveal a positive influence of digital inclusive finance on corporate green innovation, which remains robust following robustness checks and endogeneity concerns. Furthermore, we find that this influence is more pronounced in non-state-owned enterprises and areas with stringent environmental regulations. Through an in-depth investigation, we uncover two primary mechanisms through which digital inclusive finance drives green innovation: 'funding effects,' involving the alleviation of financing constraints and transaction cost reduction; and 'responsibility effects,' encompassing the enhancement of corporate social responsibility. Lastly, our study demonstrates that green innovation fueled by digital inclusive finance has positive spillovers, leading to improvements in the quality of the ecological environment and, subsequently, to increases in total factor productivity and overall corporate performance. Our findings contribute to the sustainability literature by providing theoretical foundations and practical insights regarding the synergistic development of digital inclusive finance and green innovation.

Citation: Chen, C., Fan, M., & Fan, Y. (2024). The role of digital inclusive finance in green innovation. PLOS ONE, 19(12), e0315598. https://doi.org/10.1371/journal.pone.0315598

Editor: Mosab I. Tabash, Al Ain University, UNITED ARAB EMIRATES

Received: October 12, 2023; Accepted: November 28, 2024; Published: December 23, 2024

Copyright: © 2024 Chen et al. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

Data Availability: I have uploaded our research dataset to the public database Figshare and obtained the DOI link: https://doi.org/10.6084/m9.figshare.24756030.v1.

Funding: The author(s) received no specific funding for this work.

Competing interests: The authors have declared that no competing interests exist.

1. Introduction

The continuous growth of finance undeniably stimulates economic development. Corporate leaders utilize credit avenues to enhance purchasing power, innovate production organization, and optimize resource distribution, thereby significantly improving resource allocation efficiency. This not only catalyzes the advanced evolution of industrial structures but also robustly propels comprehensive economic prosperity. Inclusive finance, introduced by the United Nations in 2005 and actively supported by the UN and the World Bank, has become a prominent trend in the financial sector. In 2015, China's State Council unveiled the "Development Plan for Inclusive Finance (2016-2020)," clarifying its profound essence. Guided by principles of commercial sustainability and equal opportunities, it emphasizes policy guidance and support, strengthens the financial system framework, refines financial infrastructure, and provides effective financial services to all social strata, ensuring affordability. In this drive, China has notably emerged as a global leader in the rapid development of digital inclusive finance.

Digital finance, representing the innovative convergence of the internet and finance, is a cornerstone in China's fintech strategy. Utilizing data analysis and information processing, it significantly enhances the quality and coverage of financial services, greatly increasing accessibility and unlocking economic growth potential, leading to higher income levels [1]. Numerous studies confirm the significant contribution of digital inclusive finance to economic growth [2]. It not only promotes inclusivity, helping to narrow the urban-rural income gap [3], but also benefits a wider population [4], continuously advancing poverty reduction efforts [5]. Additionally, the rise of digital inclusive finance strongly supports corporate growth. It fosters corporate innovation and expansion [6], drastically reduces financing costs for micro-enterprises [7], and accelerates capital structure optimization for SMEs [8]. Xie and colleagues [6] demonstrated through in-depth research that the development of digital inclusive finance lays a solid foundation for corporate innovation, significantly driving its growth. Moreover, the digital nature of digital inclusive finance expands the breadth and depth of financial services. Notably, the rapid rise of digital inclusive finance acts as a powerful catalyst for industrial digitalization, facilitating the integration of digital technologies with the real economy, and heralding transformative impacts on economic development and upgrades [9].

In response to global calls for climate action, China, in its role as a major nation, outlined its "dual carbon" blueprint at the 75th United Nations General Assembly, aiming for carbon dioxide emissions to peak by 2030. Since then, the Chinese economy has been transitioning from rapid growth to high-quality development, with "Building a Beautiful China" as a significant strategic objective. In this transition, integrating green development with economic growth becomes pivotal, potentially resolving the dichotomy between economic progress and environmental protection [10]. Green innovation serves as a powerful means for businesses to reap economic benefits and reduce ecological impact throughout a product's lifecycle, achieving positive environmental outcomes [11]. It becomes a central force propelling high-quality societal development. Hence, exploring how digital inclusive finance influences green innovation holds profound implications, aiding in ecosystem restoration and advancing carbon peaking and neutrality goals.

As the concept of sustainable development deepens, it increasingly integrates with modern finance in multiple dimensions. In this context, finance, as a core element of green technology innovation, becomes crucial in directly affecting the effectiveness of corporate green technology innovation [12]. Currently, many scholars have conducted in-depth research on the impact of digital inclusive finance on green innovation. Several studies have found that the development of digital inclusive finance can significantly promote enterprises' green technological innovation [13-15] and the output of green patents [16]. In this process, alleviating financial constraints on enterprises is a key way for digital inclusive finance to exert its effect [13, 17]. Additionally, digital inclusive finance can stimulate green technology innovation through mechanisms such as encouraging green consumption [17] and optimizing industrial structure [15]. Beyond the corporate level, digital inclusive finance plays an important role in regional green development. Research shows that digital inclusive finance helps to improve the green total factor productivity of the agricultural sector [18, 19], and also positively affects regional inclusive green growth [20] and urban green technological innovation [21]. Its mechanisms of influence include improving green technological innovation [20], optimizing energy structure [22], and more. Notably, the effect of digital inclusive finance on green innovation and the environment exhibits certain heterogeneity. Some studies have found that the promoting effect of digital inclusive finance on green innovation is more significant in eastern regions [21], high-income areas, and areas where agriculture is relatively concentrated [23]. Furthermore, the impact of different dimensions of digital inclusive