The Impact of Supply Chain Finance on Corporate Green Innovation: Evidence from A-Share Listed Companies in China

Abstract

Under the backdrop of the global economic transition towards high-quality development, green innovation has emerged as a pivotal driver in the pursuit of Sustainable Development Goals. However, enterprises often face financing constraints and high-risk challenges when engaging in green technology innovation. As a novel financial model that integrates financial resources with industrial operations, supply chain finance (SCF) has emerged as a potential solution. This study aims to investigate whether SCF effectively promotes corporate green innovation and to analyze its underlying mechanisms. Drawing on data from China’s A-share listed firms, this study measures corporate green innovation using patent data, which are identified from the IncoPat database based on the WIPO Green Inventory’s IPC classifications. Concurrently, firms’ deployment and depth of engagement in supply chain finance are assessed via textual analysis. The empirical findings demonstrate that SCF exerts a significant positive impact on fostering corporate green innovation. Mechanism analysis further uncovers that SCF enhances green innovation capabilities primarily through two pathways: mitigating financial constraints and accelerating the process of digital transformation. Results from the heterogeneity tests demonstrate that such an incentivizing impact is predominantly pronounced among enterprises characterized by superior ESG performance. Furthermore, our empirical investigation reveals a distinct inverted U-shaped pattern characterizing the nexus between SCF and corporate green innovation, which implies that an excessive dependence on SCF could ultimately impede innovative activities. We provide firm-level empirical evidence that deepens the understanding of SCF’s role in fostering green innovation, revealing that SCF is a key instrument for financial resources to integrate into the green transition. Policymakers and managers should utilize and develop SCF within a reasonable scale and focus on digital upgrading to achieve sustainable economic growth.