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How does digital finance promote entrepreneurship? The roles of traditional financial institutions and BigTech firms

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  • Sun, Xiaoyan
  • Xie, Xuanli

Abstract

Difficulties in accessing external funding present a major barrier of starting businesses. With the recent digital transformation of the financial industry, does digital finance reduce financing barrier and promote entrepreneurial activities? This study combines Peking University digital financial inclusion index of China, Peking University commercial banks digital transformation index of China, and the China Family Panel Studies database to explore the impact of digital finance on entrepreneurship. The study distinguishes digital finance provided through traditional commercial bank and BigTech firms, and finds that both can promote entrepreneurship. However, the digital finance provided by traditional commercial banks primarily affects formal entrepreneurship, while digital finance provided by BigTech firms mainly affects informal entrepreneurship. In addition, digital finance provided by BigTech firms is more inclusive, as it benefits female entrepreneurship to a greater extent.

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  • Sun, Xiaoyan & Xie, Xuanli, 2024. "How does digital finance promote entrepreneurship? The roles of traditional financial institutions and BigTech firms," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:pacfin:v:85:y:2024:i:c:s0927538x24000672
    DOI: 10.1016/j.pacfin.2024.102316
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