How Does Digital Finance Stimulate Urban Innovation in China? The Perspective of Human Capital and Consumption Upgrading

Existing literature has mainly focused on the impact of digital finance on urban innovation, while they rarely explore the channel from the composite perspective of supply and demand in innovation activities. This study aims to explore how digital finance affects urban innovation in China, based on the exploration of factor supply and market demand channels. Through using panel data from 286 cities in China over the period 2011–2020, this paper empirically checks the role of digital finance in urban innovation. The estimation indicates a significant beneficial influence of digital finance on urban innovation in China after a series of robustness tests. The mechanism analysis suggests that digital finance promotes urban innovation by relying not solely on the improvement of human capital, but also on the advancement of market consumption. These findings deepen our understanding about how digital finance stimulates urban innovation in developing countries.