Green Innovation and the Nonlinear Productivity Value of Supply Chain Finance

ABSTRACT Although supply chain finance is often presented as a productivity‐enhancing financial arrangement, limited evidence examines whether its benefits persist as supply chain finance increases and whether green innovation transmits them. This study examines the nonlinear relationship between supply chain finance and total factor productivity using 34,785 firm‐year observations from 3386 Chinese A‐share‐listed firms from 2009 to 2024. Two‐way fixed‐effects estimations reveal an inverted U‐shaped relationship between supply chain finance and total factor productivity, with an inflection point at 0.296. A similar inverted U‐shaped relationship governs the relationship between supply chain finance and green innovation, peaking at 0.249. Green innovation is positively associated with total factor productivity and partially mediates the indirect effects of supply chain finance. The findings persist across alternative measures, 1‐ and 2‐year lags, additional fixed effects, placebo analysis and instrumental‐variable sensitivity tests. The productivity curve differs significantly between heavy‐polluting and nonheavy‐polluting industries.