Innovation on credit: the role of fintech and institutional quality in global technological advancements

This study explores how alternative credit markets relate to innovation, considering the institutional quality across 89 countries over the period 2013–2019. We examine Fintech and Bigtech credit markets, along with institutional quality using two-way error component model (2ECM) and least square dummy variable (LSDV) model estimators to determine their effect on innovation activities. Our findings indicate that countries with low institutional quality but high presence of Fintechs and Bigtechs experience disproportionately more innovations. For countries with higher institutional qualities, the growth of Fintechs and credit markets hinders innovation. This study suggests that policymakers and stakeholders in fintech, bigtech need to value different institutional contexts to utilize alternative credits effectively for innovation. This research shows how alternative credit markets work together with institutional quality to impact on innovation. It provides novel insights about the ways fintech, and bigtech can both support and limit innovation depending on their respective settings.