Fintech, Bargaining Power and Total Factor Productivity of Small and Medium-Sized Enterprises (SMEs): Evidence from China

This study investigates the impact of fintech on SMEs’ total factor productivity (TFP, input-to-output efficiency) and their bargaining power (the ability to negotiate favorable terms with suppliers and customers). We use a sample of SMEs listed on China’s A-share market between 2011 and 2019. We construct a regional fintech index using Baidu search data. To ensure our findings are robust, we controlled for endogeneity and used different approaches to calculate TFP and to measure fintech. Our results show that fintech significantly improves SME productivity by strengthening their bargaining power. A unique aspect of our study findings is how fintech boosts TFP via raising SME bargaining power, significant results are observed in the eastern regions and manufacturing sector in China. This study expands the literature by showing fintech’s role beyond financial intermediation, highlighting its strategic function in improving productivity and bargaining power. Overall, our findings enrich academic debate and provide practical insights for policymakers and the business community. JEL Classification: D24, G20, G32, L25.