Digital Finance and Private Enterprise Innovation in China: Impacts, Mechanisms, and Environmental Changes

This study thoroughly examines the influence of digital finance on innovation among private firms, utilising data from private companies listed on the Shanghai and Shenzhen A-share markets over the period 2011-2021.It explores the nonlinear impacts of digital finance on both the quality and boundary of innovation, taking into account changes in external and internal environments.The study reveals that digital finance acts as a catalyst, motivating private enterprises to boost their R&D investments and improve their innovation outcomes.By easing financial constraints, providing supplementary support, and reducing managerial expenses, digital finance plays a crucial role in driving innovation within private enterprises.Particularly noteworthy is the stronger positive influence of digital finance on innovation observed in private enterprises situated in inland regions and those operating in high-tech sectors.Furthermore, the analysis uncovers that heightened economic policy uncertainty can impede the ability of digital finance to stimulate innovation expansion within private enterprises, potentially leading to a dampening effect.When corporate equity concentration is low, digital finance incentivises private enterprises to enhance the quality of their innovations.Conversely, in cases of higher equity concentration, digital finance encourages private enterprises to broaden their innovation boundaries.