Potential contributions of digital finance to alleviating the ‘low-end lock-in’ dilemma for green innovation in enterprises

Abstract

As climate change risks intensify worldwide, green technological innovation by enterprises has become a crucial factor affecting the balance between economic development and ecological governance. This paper utilizes data from Chinese A-share listed companies in heavily polluting industries from 2011 to 2021 to investigate the impact and mechanism of the knowledge spillover effect of enterprise digital finance development on the phenomenon of ‘low-end lock-in’ in green innovation. The study finds that digital finance development significantly promotes green innovation in enterprises, with a more pronounced enhancement in high-end green innovation output, thereby mitigating the phenomenon of ‘low-end lock-in’ in green innovation. Mechanism analysis reveals that the development of digital finance in enterprises facilitates high-end green innovation by alleviating financing constraints and enhancing internal control levels through internal and external governance structures. Heterogeneity tests indicate that the promotion effect of digital finance development on high-end green innovation is more pronounced in samples of state-owned enterprises, large and medium-sized enterprises, and enterprises in central and eastern regions. This paper constructs an index of digital finance development for enterprises through text analysis, providing theoretical support for micro-enterprise research on digital finance development and empirical support for the impact of financial development trends on theories of enterprise green innovation.