Studying financial aspect of green credit and regional heterogeneity on technology innovation in China

This study examines the impact of green credit on digital technology innovation in China, focusing on the influence of financialization and regional heterogeneity. Existing research primarily explores factors like government subsidies, economic growth, and environmental regulations, and there is a lack of critical analysis on the influence of green credit on digital technology innovations. To examine the internal mechanisms linking green credit to digital technology innovation, this study uses panel data from 271 Chinese prefecture-level cities from 2000 to 2020. Our findings suggest that the availability of green credit and the level of financialization have a significant positive effect on technology innovation, particularly in regions with higher economic development. However, we also find that the impact of green credit and financialization on technology innovation varies across different regions of China. Study findings reveal that green credit bolsters both the quantity and quality of digital technology innovation, emerging as a significant driver for green innovations in China. This conclusion holds even after endogeneity tests. The heterogeneous analysis highlights that various aspects of green credit, such as coverage scope, usage intensity, and digitization level, can enhance digital technology innovations. Western cities demonstrate the most considerable positive effects, followed by central cities, while the weakest impact occurs in eastern cities. Green credit primarily promotes digital technology innovation indirectly by alleviating financing constraints. These empirical findings provide valuable policy insights for fostering a harmonious relationship between China’s urban green credit facilities and green financial growth, thereby addressing the funding limitations green credit enterprises face.