Digital financial inclusion, e-commerce development and entrepreneurial activity

Abstract

While digital transformation has revolutionized financial services and commerce globally, the complex interplay between digital financial inclusion (DFI), e-commerce development, and entrepreneurial activity remains understudied, particularly in emerging economies. Prior research has largely focused on isolated effects of either digital finance or e-commerce on economic outcomes, overlooking their potential synergistic impact on new business creation. This study investigates how DFI influences entrepreneurial activity through e-commerce development in China, using panel data from 275 prefecture-level cities (2011−2021). Employing fixed-effects regression models and instrumental variable approaches, we find that DFI significantly enhances entrepreneurial activity, with stronger effects in non-central and non-provincial capital cities. The impact varies regionally: DFI's influence is most pronounced in Eastern China, where it works synergistically with human capital and trade openness, while in Central and Western regions, its effectiveness depends more on GDP and infrastructure development. Our findings demonstrate that e-commerce partially mediates DFI's impact on entrepreneurship, suggesting that digital financial services catalyze new business creation both directly and by fostering e-commerce development. These results provide novel insights for policymakers seeking to leverage digital transformation for inclusive economic growth, highlighting the importance of tailoring digital financial initiatives to regional economic contexts.