Innovation and Green Development 1 (2022) 100007

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Innovation and Green Development

journal homepage: www.journals.elsevier.com/innovation-and-green-development

Full Length Article

The impact of digital finance on green innovation: Evidence from provinces

in China
Quan-Jing Wang a, Kai Tang a, Hai-Qing Hu b, *
a
School of Business, Zhengzhou University, 100 Kexue Road, Zhengzhou, Henan, 450001, China
b
School of Economics and Management, Xi'an University of Technology, Xi'an, Shaanxi, 710048, China

A R T I C L E I N F O A B S T R A C T

JEL classification: This paper tries to uncover the shock of digital finance on green innovation by employing data for 30 provinces,
P34 municipalities or autonomous regions in China via estimation of fixed effect model and further divides the whole
E44 sample into three regions to see whether this impact is constant among the east, central, and west regions. The
Q55
empirical study shows that higher level of digital finance is usually associated with better green innovation, which
Keywords: is reliable while we carry out robustness tests. Furthermore, while coverage and depth of digital finance benefits
Digital inclusive finance
for green innovation, the degree of it cannot affect green innovation. In addition, heterogeneity analysis for
Green innovation
Heterogeneity analysis
different regions shows that while the digital finance tends to be beneficial for green innovation in western and
central regions, it exerts no significant impact in easter regions.

1. Introduction China is targeting to achieve high-quality development, and innova-

After nearly forty years' quick development, the economy of China has
entered a new normal. The country's innovation capacity has further
enhanced, and the mode of development has changed from scale to quality
and efficiency, and the driving force of development has turned from
factor input to innovation-driven. However, due to the transition period of
economic growth, the transition period of old and new driving forces, the
transition period of improving quality and efficiency and the COVID-19
outbreak, China's economic development is facing many difficulties.
The key to solving these problems is still innovation, but traditional
technological innovation cannot consider the natural environment,
meaning that merely traditional technology innovation has damaged the
ecological environment while promoting rapid economic growth, which
can eventually affect the sustainable development (Li et al., 2019). It is
not compatible with the concept of high-quality development. The 2020
According to the report of Environmental Performance Index (EPI) in
2020, which displays the 32 performance indicators in 11 policy areas in
180 countries and regions around the two policy objectives of environ-
mental health and ecosystem vitality. Among them, China's total EPI
score was 37.3, which lower than other 119 countries or economies.
Therefore, when emphasizing innovation-driven development, ecolog-
ical civilization construction should also be placed in a prominent posi-
tion along with green development.
tion should be the primary driving force of sustainable development,
emphasizing that green development becomes the common goal. As a
combination of technology innovation and environmental protection,
green innovation owns two special characteristics such as innovation-
driven and green development (Dai et al., 2021). Only by attaching
importance to green innovation can China execute the new development
concept and achieve high-quality development (Owen et al., 2018).
Green innovation including energy savings, emission reduction, and
environmental management, which is a kind of technology innovation
focusing on environmental management (Feng, Wang, et al., 2021; Feng,
Yang, et al., 2021; Zheng et al., 2021). However, due to the application of
new patents on green innovation needs long time, express high risk on
profit, as well as the higher uncertainty of output, few financial in-
vestments were invested into projects of green innovation, leading to the
slow process of green innovation in China (Li et al., 2017; Li and Zeng,
2020). According to research statistics, the number of applications
referring to environmental management innovation only accounts for
6.2% of the number of total invention patent applications in China,
which is lower than other countries (Li et al., 2018; Song et al., 2015).
The financial capital is essential in promoting green innovation, but it
is difficult to meet the financial demand of green projects only by relying
on free funds or government financial support (Lin et al., 2014; Noailly &
Ryfisch, 2015; S
anchez-Sellero & Bataineh, 2021). Instead, it should also

* Corresponding author.
E-mail address: huhaiqing@xaut.edu.cn (H.-Q. Hu).

https://doi.org/10.1016/j.igd.2022.100007
Received 15 August 2022; Received in revised form 15 October 2022; Accepted 16 October 2022
Available online 24 November 2022
2949-7531/© 2022 Published by Elsevier B.V. on behalf of Business School, Zhengzhou University. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Q.-J. Wang et al.
rely on a valid and supportive financial market (Lv et al., 2021; Stucki
and Arvanitis, 2018). However, due to traditional finance owns some
disadvantages such as high transaction cost and information asymmetry,
many green enterprises cannot get enough financial support. In the new
digital era, digital inclusive finance provides a way to solve this problem
(Ferreira et al., 2019; Jardak & Hamad, 2022; Katsamakas et al., 2022;
Nwankpa & Roumani, 2016). As an emerging finance, digital finance
refers to the application of updated digital technology in traditional
payment, transfer, credit, and other financial services or transactions.
Digital inclusive finance covers all actions aimed at promoting inclusive
finance through digital financial services (Hess et al., 2016; Huang &
Huang, 2018; Matt et al., 2015).
China provided scientific guidance for the spread of inclusive finance
and vigorously supports the application of digital information technol-
ogies (seeing big data, cloud computing and etc.) in traditional finance.
Therefore, the scale of inclusive financial services is getting bigger and
bigger, and the economic group enjoying it is also getting wider and
wider. In this way, digital inclusive finance may break the limitations of
traditional finance to some extent, thus doing some good to stimulating
the process of research and development in green technologies.
It is urgent to query that whether the green innovation is affected by
digital finance, only knowing answers for such essential issues can gov-
ernments better introduce green technologies through the development
of digital finance (Rao et al., 2022; Sun, 2020). However, by browsing
previous studies, this essential issue has been ignored by the literature.
With the rapid growth of digital finance in current decades, it is
reasonable to suppose that digital finance would be the key part of
financial market in the future. Faced with various problems and diffi-
culties encountered during the process of economic development and
transformation, China should place innovation in a key position and
attach more importance on the improvement of ecological civilization, so
as to achieve sustainable development and better environmental quality.
Green innovation is an essential part to implementing innovation-driven
development strategy, which is in line with the new development
concept and benefits for achieving co-existence between human living
and natural environment. Therefore, if digital finance is beneficial for the
green innovation, then it is meaningful to investigate the digital finance's
impact on green innovation and further investigate what factors can
change digital finance's impact on green innovation (Nayal et al., 2022).
Then can the digital finance exert some impact on green innovation?
In our view, digital finance promotes green innovation through the
following ways. First, digital finance is essential to avoid the problem of
information asymmetry between financial institution who manages
financial capital and firms which need financial source to conduct the
projects referring to green technologies, thus increasing financial support
for innovative green enterprises, easing their financing constraints, and
thus promoting green technological innovation (Rao et al., 2022; Yao &
Yang, 2022). Second, digital finance usually associates with higher level
of green innovation by reducing the cost of financial operations and
transactions (Tang et al., 2020; Yu et al., 2022). Thirdly, the digital
finance accelerates green transformation of traditional industries and
contributing to a green innovation. It is thus reasonable to infer that
digital finance may positively affect the green innovation.
The potential contributions of this research to previous literatures are
as follow. First, contrary to previous scholars that examine the impact of
traditional finance such as financial capital or venture capital on tech-
nology innovation (Verhoef et al., 2021), we concentrate on the impact of
digital inclusive finance on green innovation at the region level so as to
better understand the causal link from digital finance to green innovation
versus that from the firm level (Tang et al., 2020). Once the digital fi-
nance's impact on green innovation is confirmed, we further pay atten-
tion to the specific aspects of digital inclusive finance such as the
coverage, depth, and usage of digital finance, and further examine their
impact on green innovation. Finally, because there exist differences in
the digital economy, innovation performance, and financial development
among different regions in China, we also target whether digital inclusive
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Innovation and Green Development 1 (2022) 100007
finance's impact on green innovation varies among these three different
regions such as east, central, and west.
We proceed the remaining parts of this paper as follows. Section 2
mainly refers to literatures and theoretical analysis. Section 3 provides
information of variable selection, descriptive statistics, and model
setting. Section 4 displays empirical results and discussions, while the
last part is the conclusion and suggestion.
2. Literature review and hypotheses' proposal
2.1. Review of relevant literatures
With the growing importance of sustainable development, the path to
achieve sustainable development such as digital finance and green
innovation has gained more attention, and a majority of scholars have
paid attention to the relationship between such two (Feng et al., 2022;
Kong et al., 2022; Lee et al., 2021; Liu et al., 2022). Some of such studies
suggested that the better digital finance is often associated with higher
level of green innovation (Jiang et al., 2022). One possible reason for this
link is that there is no sufficient financial support on research and
development on technological innovation from the firm level due to the
firms' serious financial constraints under the traditional financial model
(Huang et al., 2019; Kong et al., 2022). However, digital finance can
alleviate financing constraints by avoiding the information asymmetry
between firms and financial institution and which can eventually pro-
mote the technological innovation of SMEs (small- and medium-sized
enterprises) (Yu et al., 2022). By further investigating the transmission
path of the innovation incentive effect, some scholars argued that all the
three specific aspects of digital finance such as coverage, depth and
usage, and digital support services can positively promote the technology
innovation from a micro perspective (Chang, Cheng, et al., 2021; Chang,
Feng, et al., 2021; Li et al., 2022). Additionally, more usage of digital
finance would also associate with higher level of technology innovation
in cities among western and central regions, thus supporting the inclusive
characteristics for new model of digital finance (Yao & Yang, 2022).
Some scholars move a further step to support that digital finance
associates with better green innovation from the view of environmental
protection (Chang, 2011; Du & Li, 2019). For instance, Singh (2020)
found that digital finance does some good to reducing carbon emissions
by stimulating green innovation and optimizing the resource allocation,
among which the reduction of sulfur dioxide emissions is the most
prominent part. In addition, Song et al. (2021) found in their study that
digital finance can also indirectly suppress the emission of environmental
pollutants by means of industrial upgrading. From an enterprise point,
growing digital industrialization level reduces the production cost sub-
ject to buy new equipment and introduce new technology, which en-
courages manufacturers to correct their own misallocation of resources.
Meanwhile, digital finance is also critical to improve the competitiveness
of enterprises, attracts more enterprises to join in promoting intensifi-
cation, intelligence and information technology, and ultimately improves
the utilization rate of natural resources of the whole industry. At the same
time improve the enterprise competitiveness, attract more enterprises
join intensive, intelligent and informatization, ultimately improve the
utilization rate of the natural resources of the whole industry.
Furthermore, digital finance offers more convenience for the gov-
ernment to effectively regulate the energy conservation and utilization,
which is essential in improving the regional survival and development
environment (Chakraborty & Mazzanti, 2020; Sun et al., 2019). In
addition, Steffen et al. (2020) proposed that the digital finance would
affect the energy consumption through such two following categories:
restrain effect and growth effect. Among them, the growth effect sub-
divides the energy consumption growth caused by digital finance into the
direct energy consumption increase caused by the production, use and
disposal of digital technology and the indirect energy demand increase
caused by economic development. Sun (2020) confirmed that the use and
updating of network equipment observably increased the per capita level
Q.-J. Wang et al.
of energy consumption. However, Yu et al. (2022) studied from the time
dimension, they pointed out that digital finance is beneficial for green
development in the short run, but it would eventually increase energy
consumption in the long term. To sum up, the application of digital
finance exerts some impact on green development of China to a certain
extent, but there is much uncertainty and is not just onefold positive role
or negative role. Similarly, more scholars also attach more importance on
the relationship between digital finance and high-quality from the
perspective of green economy and green innovation. For instance, Yao
and Yang (2022) discussed the potential mechanism of digital economy
on green economy from the view of distortion of resource allocation.
However, by browsing existing literatures, there are rare studies that
investigate the digital finance's impact on green innovation directly, only
three studies are highly similar to our study. Firstly, Fan et al. (2022)
empirically investigated the impact of digital economy on green innovation
by employing data of resource-based enterprises, suggesting that digitali-
zation promotes the generation, sharing, and exchange of information.
Jiang and Zhang (2022) pointed out that digitization of enterprises is
beneficial for promoting green innovation of enterprises from a logical
perspective, but do not carry out quantitative verification. However, both
two papers conducted empirical investigation from the micro perspective,
and ignoring the potential mechanisms and heterogeneity. Third, Rao et al.
(2022) analyzed the shock of regional digital finance on technological
innovation and noted that this updated finance would bring about more
application of patents for cities. Given by this, this paper tries to uncover the
relationship between digital finance and green innovation to fill the gap.
2.2. Hypotheses' proposal
Digital finance may promote green innovation through the following
ways. Firstly, enterprise green innovation has the characteristics of sunk
investment, uncertain achievement, and high adjustment cost and needs
sufficient financial resources for support. Financial institutions that
conducted traditional finance are not willing to issue the loan or bonds
lend to green companies, because they have limited access to information
about their production. As a result, the financing of green enterprises is
difficult and expensive, and their green innovation activities will be
inhibited (Fan et al., 2022; Ferreira et al., 2019). As an emerging finance
brought by the rapid development of digital information technology and
financial development, financial institutions can effectively evaluate a
borrower's credit rating, track the flow of financial resources and usage,
hence improving the availability of financial resources to provide
financial support to green enterprises that are excluded from traditional
financial services (Feng et al., 2022). Thus, digital finance offers green
enterprises chance to allocate more financial capital to research and
development on projects referring to green technologies, which eventu-
ally improve the level of green innovation (Liu et al., 2022).
Second, digital finance can reduce the cost of financial operations and
transactions, which is usually associated with higher level of green
innovation (Tang et al., 2020; Yu et al., 2022). As a combination of digital
information technology and financial development, digital finance would
do some good to offer support to enterprises that engaging into green
innovation to obtain financial services, enabling green enterprises to
efficiently and low-cost match with appropriate lenders, thus obtaining
financial support, reducing the financing cost of innovative green enter-
prises, and lowering the pressure for their green technological innovation
activities (Cao et al., 2021; Jiang et al., 2022). Eventually, the level of
green innovation will rise due to the support of digital finance.
Thirdly, the digital finance may induce the transformation of green
development and industrial upgrading, which can eventually contribute
to green innovation. Under China's dual carbon targets of “peak carbon
and carbon neutrality”, the need for green economic transformation is
becoming increasingly urgent. As a major new economic model, digital
finance is inevitably colliding with the green economy and generating
new sparks in the collision. The emerging digital finance is becoming
more and more closely integrated with the green economy, promoting
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Innovation and Green Development 1 (2022) 100007
the green transformation and upgrading of the traditional producing
manner, which is also the goal to be pursued by the green economy. The
green economy pursues the transformation and upgrading of traditional
energy sources, improving energy efficiency and sustainability as a
fundamental feature of the green economy. With the growing utilization
of digital finance and the continuous advancement of the renewable and
clean energy, China's dependence on traditional energy sources is grad-
ually decreasing and the transformation and upgrading of traditional
energy sources in a green and efficient manner is being promoted.
Based on the above analysis, research hypothesis H1 of this paper is
proposed.
H1. Digital finance usually associates with higher level of green
innovation.
Digital finance stimulates the process of green innovation by
strengthening financial support to underdeveloped regions and broad-
ening the coverage of financial services. Traditional financial services
imply that green enterprises in underdeveloped areas are unable to enjoy
convenient financial services, whereas digital finance has significant
advantages over traditional finance due to the rapid application of digital
information technology. Therefore, digital finance is gradually solving
the long-standing problem of insufficient financial support in underde-
veloped regions, which to some extent alleviates the financing problem of
green enterprises in underdeveloped regions that were previously
excluded from the traditional financial system. Overall, digital finance
would do some good to promoting the process of green innovation in
underdeveloped regions.
This paper now proposes research hypothesis H2.
H2. The digital finance's impact on green innovation varies among
different regions, and such effect is stronger in the central and west re-
gions where traditional finance is not developed.
We utilized following figure to show the theoretical link between
digital finance and green innovation, which can be seen in Fig. 1.
3. Methodology
3.1. Employed variables
3.1.1. Dependent variable
There is presently no consensus on the measurement and definition of
a green technology index (Wang, Feng, et al., 2021; Yang et al., 2022).
This paper hence refers to the index of green innovation proposed by
Wang, Wang, et al. (2022) and Zheng et al. (2021). We measure green
innovation by calculating the sum of the number of authorized green
inventions and green utility models (Wang, Feng, et al., 2022).
3.1.2. Independent variables
Referring to the measurement of digital finance, this paper refers to
the measurement of digital inclusive finance provided by Liang (2019)
and chooses the total index of digital finance to represent the level of
digital finance.1 In addition, to further examine the impact of specific
aspects of digital finance on green innovation, we also select three as-
pects of digital finance such as coverage breadth, depth, and degree of
digital finance.
1
According to the calculation of digital finance provided by Peking University,
the first step is to standardized the specific indicators under the second dimension
to form comparable indicators. Then, the analytic hierarchy process (AHP) is used
to determine the weight of each intermediate level relative to its upper level, and
then the coefficient of variation method is used to find the weight of the lowest
level (that is, each specific index) to its upper level. Finally, these weights are used
for exponential synthesis to form the development index of breadth of coverage,
depth of use and degree of digital support services. Then the index is dimen-
sionless to obtain the final China Digital financial Inclusion index.
Q.-J. Wang et al. Innovation and Green Development 1 (2022) 100007

Fig. 1. The influence path of digital finance on green innovation.

3.1.3. Control variables Table 1

Variable definitions.
(1) Economic performance: considering the importance of economic Variable type Variable Name Measurement method
performance in green innovation, this paper includes it as a key symbol
control variable, which is measured by GDP per capita and the Explained GTI Green innovation The total number of
unit of it is million yuan (Long et al., 2021; Wang, Feng, Chen, variable obtained green
Wen, & Chang, 2019). inventions and green
(2) Industrial structure: as different structure of industry would bring utility
Explanatory DIFI Digital Finance Peking University Digital
different demand on green technology, thus it is necessary to con- variables Inclusive Finance Index
trol the potential impact of industrial structure on green innovation. (2011–2020)
In this paper, we utilize the share of secondary industry to represent Bread Index of coverage breadth Ditto
industrial structure, which is measured by the ratio of value added Depth Index of depth of use Ditto
Digit Index of degree of Ditto
in secondary industry to total GDP (Wang, Feng, et al., 2022; Zhao
digitalization
et al., 2022; Zheng, Feng, Jiang, & Chang, 2022). Control Pgdp Economic development GDP per capita
(3) Degree of government intervention: while exploring the influ- variables level
encing factors of green innovation, the role of government cannot Sec Industrial structure Value added of the
be ignored. The government mainly intervenes in green innova- secondary industry/GDP
Gov Degree of government Fiscal expenditure/GDP
tion through financial expenditure, and so this paper uses the intervention
share of financial expenditure to GDP to measure the government Epe Emphasis on Share of expenditure on
intervention (Wang, Feng, et al., 2022; Wang, Wang, et al., 2022). environmental protection environmental protection
(4) Emphasis on environmental protection: the expenditure on envi- to total fiscal expenditure
Edu Human capital Share of citizens
ronmental protection lies at the heart of environmental innova-
experiences high
tion, according to the innovation theory, the more attention the education to total
government attaches to environmental protection usually population
accompanied by higher level of innovation. In this paper, we
measure the governments' emphasis on environmental protection
by the share of public expenditure on environmental protection to
local fiscal expenditure (Yang, Feng, Chang, & Wang, 2021).
3.2. Descriptive statistics
(5) Human capital: The human capital of a region may also affect its
green innovation. According to previous literatures, the human
We firstly depict the descriptive statistics of such variables. For the
capital can be measured by the share of citizens owns a higher
green innovation, the maximum of it is 30,799, while the minimum one is
education to the total population (Wang et al., 2019; Wen et al.,
only 24, and the standard deviation is as high as 4990, indicating that
2022).
performance of green innovation varies large among different provinces,
municipalities or autonomous regions. Similar view can be found while
The detailed definitions and index of such variables can be found in
we pay our attention to the descriptive statistics of digital finance, the
Table 1.
maximum value of it is 410.3, while the minimum value is only 18.33,
The data of green innovation index is derived from GPRD database of
and the standard deviation is as high as 91.57, indicating that the process
China Research Data Service Platform. Data for digital finance and three
of digital finance is not constant among different provinces, municipal-
aspects of digital finance is obtained from the Peking University Digital
ities or autonomous regions.
Inclusive Finance Index (2011–2020). The original data of economic
Because the data gap of the major variables is too large, the model
development level, industrial structure, degree of government interven-
reduces the value range of variables by taking logarithms of variables, so
tion, emphasis on environmental protection, and human capital are
as to weaken the heteroscedasticity of the model and better estimate it
sourced from National Bureau of Statistics. The sample contains 30
(Wang, An, et al., 2021). The descriptive statistics of logarithmic vari-
provinces, municipalities or autonomous regions, the period is from 2011
ables can be seen in Table 2. We find that the value ranges of the green
to 2019.2
innovation, digital finance, and GDP per capita have been greatly
reduced, and the standard deviation has also decreased from 4990,
2 91.57, and 43,853 to 1.348, 0.670, and 0.442, respectively.
Due to the data availability, we remove the Tibet autonomous regions.

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Q.-J. Wang et al. Innovation and Green Development 1 (2022) 100007

Table 2 Table 4
Variables' descriptive statistics. VIF tests for primary variables.
Variable N Mean Median S.D Minimum Maximum Variable VIF 1/VIF

lnGTI 270 7.477 7.503 1.348 3.178 10.34 lnDIFI 1.650 0.607
lnDIFI 270 5.151 5.368 0.670 2.909 6.017 lnPgdp 2.740 0.365
lnBread 270 4.995 5.249 0.827 0.673 5.952 lnSec 1.570 0.635
lnDepth 270 5.133 5.247 0.646 1.911 6.087 lnGov 2.080 0.480
lnDigit 270 5.458 5.748 0.716 2.026 6.136 lnEpe 1.100 0.909
lnPgdp 270 10.76 10.69 0.442 9.691 12.01 lnEdu 1.070 0.931
lnSec 270 0.903 0.850 0.231 1.833 0.479 Mean 1.700
lnGov 270 1.410 1.427 0.390 2.120 0.274
lnEpe 270 3.556 3.561 0.309 4.440 2.687
lnEdu 270 3.981 3.963 0.476 6.908 1.445 4.2. Empirical results and analysis

We estimate the panel model which use digital finance, economic

3.3. Econometric model
To empirically investigate the impact of digital finance on green
innovation, similar to Feng, Wang, et al. (2021), Feng, Yang, et al.
(2021), Chang, Feng, et al. (2021), and Fu et al. (2020), we set the panel
estimating model as follows:
lnGTIi;t ¼ α0 þ α1 lnDIFIi;t þ γlnXi;t þ χ i þ χ t iεi;t
Here, GTI stands for the green innovation and DIFI represents the
total index of digital finance, X indicates for the vector of above-
mentioned control variable such as economic performance, industrial
structure, government intervention, emphasis on environmental protec-
tion, and human capital, which can affect green technological innova-
tion. Meanwhile, the γ is the vector for corresponding coefficient of such
control variables. Referring for the notation, i often capture the dimen-
sion of individual while t usually stands for the dimension of time, and εi;t
is the random error term.
4. Empirical results
4.1. Correlation analysis and collinear diagnosis
Table 3 shows the correlation analysis of main variables in this paper.
First, the absolute values of correlation coefficients of variables are all less
than 0.6, and so we preliminarily judge that there is no multicollinearity.
Second, the correlation coefficients of dependent variable and other
variables are significant at 1%, supporting that the selection of variables is
feasible. Third, the green innovation index lnGTI is significantly positively
correlated with digital financial development level lnDIFI, economic
development level lnPgdp, and human capital lnEdu at the significance
level of 1% and is significantly negatively correlated with industrial
structure lnSec. The correlation coefficient sign is basically consistent with
expectation. Fourth, the sign of the correlation coefficient between green
innovation indicator lnGTI and emphasis on environmental protection
lnEpe is negative, which contradicts the research hypothesis proposed in
this paper and needs to be further tested by an empirical model.
Table 4 presents the results for VIF test of the main variables in this
paper. We can find that all the VIF values of key variables are less than 4,
offering evidence that there exists no problem of multicollinearity in this
empirical investigation.
development level, industrial structure, degree of government interven-
tion, emphasis on environmental protection, and human capital as
explanatory variables and the green innovation index as dependent
variable by employing three panel estimation. As shown in Table 5, the
panel model involves three types: original least square estimation (Ols),
panel estimation with fixed effect (FE), and panel estimation with
random effect (RE). The regression results of the three models all show
that the coefficient of digital finance is positive and passes the signifi-
cance test at 1%, providing that the digital finance usually associates with
a higher level of green innovation. This further verifies our conjecture
that hypothesis 1.
Even though all three models support the digital finance's impact on
green innovation, we need conduct Hausman test to choose that which
one is more powerful to conduct further investigation. The initial
Hausman test shows that the statistic of Hausman test is 17.61 and the P
value is 0.0073. Thus, we reject the null hypothesis at the panel esti-
mation with random effect is more powerful that with fixed effect, in
other word, the panel estimation with fixed effect is more appropriate.
According to the results of panel estimation with fixed effect, the coef-
ficient of digital finance is 0.159, passing the significance test at 1%,
specifically, a 1% change in the digital inclusive finance would bring a
0.159% change of green innovation in the same direction. This result
confirms that digital finance is usually positively associated with green
innovation.
Referring to the control variables, we can find that the estimating
coefficient of economic development level is 1.378 and passing the sig-
nificance test at 1%, indicating that for every 1% increase in GDP per
capita, the green innovation index rises by 1.378%. This denotes that
economic development is beneficial for the development of green inno-
vation. However, the coefficient of industrial structure is 1.780 and
significant at 1%, implying that industrial structure would exert negative
impact on the level of green innovation. A higher proportion of added
value by the secondary industry in GDP usually brings a decrease of green
innovation.
4.3. Robustness test
Once the baseline results support that digital finance exerts a positive
impact on green innovation, its robustness still needs to be tested. This
paper conducts a robustness test from the following perspective:

Table 3
Correlation analysis of the main variables.
lnGTI lnDIFI lnPgdp lnSec lnGov lnEpe

lnGTI –
lnDIFI 0.367*** –
lnPgdp 0.177*** 0.579*** –
lnSec 0.252*** 0.325*** 0.300*** –
lnGov 0.0480 0.0870 0.503*** 0.297*** –
lnEpe 0.0930 0.0530 0.0180 0.196*** 0.247*** –
lnEdu 0.266*** 0.183*** 0.205*** 0.150** 0.001 0.126**

Note: ***, **, and * stands for the significant level of 1%, 5% and 10% level, respectively.

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Q.-J. Wang et al. Innovation and Green Development 1 (2022) 100007

Table 5 exerts more influence on the green innovation. Specifically, the former's
Regression results for the three models. impact on the latter is analyzed from three dimensions: coverage, depth,
Ols Re Fe and degree of it. Coverage breadth refers to the ability of common people
to access to digital finance. Depth of use mainly captures the actual
lnDIFI 0.703*** 0.180*** 0.159***
(0.140) (0.048) (0.048) amount of application of Internet financial services. Degree of digitali-
lnGgdp 0.369 1.315*** 1.378*** zation denotes the facilitation, credit, and affordability of digital inclu-
(0.274) (0.159) (0.159) sive finance.
lnSec 1.009** 1.715*** 1.780*** The estimating results for such three aspects' impact on green inno-
(0.396) (0.268) (0.269)
lnGov 0.033 0.163 0.107
vation appear in columns (2)–(4) of Table 6. We find that the coefficients
(0.271) (0.225) (0.232) of lnBread and lnDepth is 0.113 and 0.169, respectively, both are signif-
lnEpe 0.780*** 0.027 0.034 icant at 1%, indicating that such two aspect of digital finance is positively
(0.248) (0.084) (0.082) associated with green innovation. However, the coefficients of lnDigit is
lnEdu 0.633*** 0.033 0.030
0.042, which is not significant at 10% level, suggesting that the degree of
(0.159) (0.036) (0.035)
_cons 6.709** 8.876*** 9.630*** digitalization cannot promote the green innovation. One potential
(2.609) (1.497) (1.482) explanation for this phenomenon is that digital finance in China is still in
N 270 270 270
the early stages of development, and its degree of digitization is relatively
R2 0.227 0.860 low and cannot play a significant role at promoting the level of regional
green innovation.
Hausman test chi2(6) ¼ 17.61 Prob > chi2 ¼ 0.0073

Note: ***, **, and * stands for the significant level of 1%, 5% and 10% level, 4.5. Heterogeneity
respectively.
According to our earlier analysis, the relationship between digital
changing the measurement of green innovation by the number of granted finance and green innovation may vary among different regions since
green utility models since the number of green inventions meets the their digital gap or different level of financial development. In view of the
originality standard and can better reflect the process of green innovation differences in digital finance's impact on green innovation among
than green inventions, the impact of digital inclusive finance on the different regions in China, we divide the full sample into three sub-
number of authorized green inventions in various regions is further samples in accordance with the geographic regions such as east, cen-
examined. tral, and west regions. The east region includes 11 provinces or munici-
The estimated results of the above robustness test appear in column (1) palities: Beijing, Hebei, Tianjin, Zhejiang, Shandong, Liaoning, Shanghai,
of Table 6. The result again supports that the higher level of digital finance Fujian, Guangdong, Jiangsu, and Hainan. The central region includes 10
usually associates with better performance of green inventions, suggesting provinces or autonomous regions: Heilongjiang, Shanxi, Jiangxi, Hunan,
that digital finance exerts a positive influence on green innovation. In Jilin, Guangxi, Inner Mongolia, Henan, Hubei, and Anhui. The west re-
summary, the empirical conclusion in this paper that digital finance gion covers 9 provinces, municipalities or autonomous regions: Sichuan,
usually positively associates with green innovation is robust. Xinjiang, Shaanxi, Gansu, Chongqing, Yunnan, Qinghai, Ningxia, and
Guizhou.
4.4. The impact of specific aspects of digital finance The corresponding estimating results for such three sub-samples can
be obtained in Table 7. For east region, the coefficient of lnDIFI is 0.053,
Once the positive impact of overall digital finance on green innova- which is greater than 0 but not passing the significance test at 10%,
tion is confirmed, we next examine that which aspect of digital finance showing that there exists no significant influence of digital finance on
green innovation in east region; meanwhile, the coefficient of lnDIFI in
Table 6 column (2) and (3) is 0.159 and 0.251, respectively, and both are sig-
The role of specific aspects of digital finance. nificant at 10% at least, providing that the digital finance exerts a posi-
(1) Green invention (2) (3) (4) tive shock on green innovation in central and western regions.
One possible reason for the above finding is that the development of
LnDIFI 0.292***
(0.042) traditional financial development in the east region is better than that in
lnBread 0.113*** other two regions, in other words, the traditional finance can better meet
(0.035) the demand of green projects in east region, thus the supplement effect of
lnDepth 0.169*** digital finance in green innovation for financial capital is not significant.
(0.046)
lnDigit 0.042
However, the development of traditional financial in the central and west
(0.034) regions is relatively backward than that in the east region, and so digital
lnPgdp 0.700*** 1.426*** 1.403*** 1.675*** inclusive finance would be more likely expressing a supplement effect for
(0.138) (0.152) (0.145) (0.135) traditional financial capital on the process of green innovation.
lnSec 1.417*** 1.827*** 1.730*** 1.889***
We next compare the coefficients in the last two columns to analyze
(0.233) (0.269) (0.270) (0.273)
lnGov 0.091 0.171 0.167 0.256 the different impact of digital finance on green innovation in central and
(0.197) (0.227) (0.224) (0.238) western regions. In the central region, 1% increase of digital finance
lnEpe 0.040 0.034 0.039 0.095 would bring about a 0.159% rise of green innovation, while it can cause a
(0.072) (0.083) (0.081) (0.082) 0.251% increase of green innovation in the west region. Therefore, the
lnEdu 0.007 0.039 0.044 0.019
digital finance's positive impact on green innovation is higher in western
(0.031) (0.035) (0.035) (0.036)
year yes yes yes yes region than that in central region, again confirms the conjecture that the
province yes yes yes yes digital finance is more important in promoting green innovation among
_cons 4.257*** 9.798*** 9.772*** 12.385*** regions own less development of traditional financial capital.
(1.305) (1.479) (1.386) (1.227)

N 270 270 270 270 5. Concluding remarks

R2 0.840 0.859 0.861 0.854

Note: ***, **, and * stands for the significant level of 1%, 5% and 10% level, This research mainly empirically explores the shock of digital finance
respectively. on green innovation by using panel data for 30 provinces, municipalities

6
Q.-J. Wang et al. Innovation and Green Development 1 (2022) 100007

Table 7 government should continuously update financial services related to

Regional heterogeneity regression results. green development, gradually improve the database and search system of
East Central West green patents, realize the information sharing of green patents, and
improve the quality of green patents. A green government evaluation
lnDIFI 0.053 0.159* 0.251**
(0.059) (0.087) (0.107) system should be established by taking green development as the guide,
lnPgdp 1.462*** 1.148*** 1.713*** increasing investment and subsidies for green innovation, and encour-
(0.249) (0.266) (0.347) aging enterprises to develop green patents. Finally, governments at the
lnSec 1.173** 2.467*** 1.478** central and local levels should aim to accelerate the cultivation of green
(0.464) (0.361) (0.722)
lnGov 1.410*** 0.968** 0.118
innovation talents and establish and improve the green patent protection
(0.421) (0.414) (0.405) system. Doing so can gradually create the proper cultural atmosphere for
lnEpe 0.009 0.449** 0.186 green innovation.
(0.108) (0.196) (0.157) Due to our limited time, data and energy, one may further visually
lnEdu 0.162* 0.036 0.007
display the current status and geographical distribution characteristics of
(0.087) (0.083) (0.048)
_cons 6.013*** 10.958*** 15.697*** digital finance and green innovation, which can help readers better un-
(2.149) (2.695) (3.184) derstand the trend and change of digital finance or green innovation. In
year yes yes yes addition, since this paper mainly analyzed the channels through which
province yes yes yes can digital finance affect green innovation from the micro-perspective,
N 99 90 81 which cannot be empirically investigated according to the province-
R2 0.895 0.847 0.841 level data, one can further explore the path through which does digital
Note: ***, **, and * stands for the significant level of 1%, 5% and 10% level, finance affect green innovation once they obtained relevant data on firm
respectively. level. Moreover, we only consider the regional heterogeneity due to the
data availability in heterogeneity analysis, one can further expand from
other perspectives such as the heterogeneity of development of digital
or autonomous regions in China during the period 2011–2019, according technology, environmental regulation and resource allocation.
to the database of digital finance provided Peking University from 2011
to 2019 and panel estimation with fixed effect. In addition, once the Declaration of competing interest
impact of digital finance on green innovation is confirmed, we also
examine the role of specific aspect of digital finance in green innovation The authors declare that they have no known competing financial
and further query the heterogeneity in digital finance's impact on green interests or personal relationships that could have appeared to influence
innovation among different regions. The main empirical findings of our the work reported in this paper.
study are listed as follow. First, the higher level of digital finance is
usually associated with better performance of green innovation, which is Acknowledgments
also credible while we replace the measurement of dependent variable to
conduct robustness test. Second, digital inclusive finance significantly This research is supported by the National Natural Science Founda-
improves the level of regional green innovation through coverage and tion of China (funding number: 72204227); Humanities and Social Sci-
depth of use, while the degree of digitalization cannot promote the ences Foundation of Ministry of Education of China (funding number:
process of green innovation. Third, heterogeneity analysis shows that the 22YJC790130).
digital finance's impact on green innovation varies among east, central
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