Green digital finance and technology diffusion

Green digital finance and technology diffusion

Technology diffusion is localised and usually located close to where innovations are developed (Keller, 2002; Dewald and Truffer, 2012), and technology tends to spread among geographically proximate partners (Han and Seo, 2023). The multi-dimensional proximity theory suggests that geographical, cognitive, and institutional proximity can effectively promote technological diffusion among institutions, cities, regions, and countries (Boschma et al., 2015). Technology diffusion depends on the geographical proximity of the innovator (Losacker et al., 2023), because knowledge involved in technology tends to be spatially sticky (Balland and Rigby, 2017). Lengyel et al. (2020) also suggested that spatial proximity plays a more important role in complex technologies, such as green technologies. However, Ocampo-Corrales et al. (2021) showed that knowledge flows for green technologies (i.e., renewable energy technologies), indicated by patent citations, are not localised, but rather span large distances.

However, green digital finance may have the following advantages to break through localisation barriers and facilitate technology diffusion over traditional finance. First, the digitalisation of finance includes an ecosystem of technologies such as big data, artificial intelligence, mobile platforms, and blockchain, thereby eliminating the obstacles geographical distances pose to technology diffusion (Abramo et al., 2020; Anacka and Lechman, 2023). Global village theory argues that new Internet technology helps break down communication barriers between individuals and organisations, and digital technologies are useful in lowering the coordination costs associated with distance (Forman et al., 2005). Therefore, green digital finance utilises digital technologies to enhance the flow of financial resources and to facilitate technical cooperation and knowledge sharing (Xu et al., 2023). Second, green financing is essentially policy-driven and environmentally focused (Zhang et al., 2019), which broadens the financing channels and alleviates financing constraints for green projects. It allows financial institutions to innovate financial instruments according to the green capital needs of enterprises, which stimulates green technology innovation and diffusion (Balsmeier et al., 2017; Peng et al., 2021). Moreover, green digital finance requires environmental information disclosure, encouraging technology cooperation and information-sharing among enterprises, between financial institutions and enterprises, and between financial institutions and financial institutions. Based on the above analysis, the following hypothesis is proposed:

Hypothesis 1: Green digital finance overcomes localisation barriers and promotes technology diffusion.

Green digital finance, digital economy, and technology diffusion

Green digital finance fosters a digital economy with the development and integration of digitalisation and greening. It provides digital technology, application scenarios, data elements and efficient industrial interaction modes, thus contributing to digitalisation upgrading in a multi-dimensional way. By simplifying the programmed and complicated green financial service process under the traditional financial system, green digital finance expands the scope of financial services, improves the efficiency of capital allocation, and strongly supports digital transformation (Yu et al., 2022). Moreover, it stimulates new innovative and entrepreneurial activities across traditional industry boundaries, such as embracing networks, building ecosystems and communities, and integrating digital assets, thus accelerating the formation of new industrial patterns. On this basis, the digital economy will further encourage technology innovation and knowledge sharing.

First, the level of digitisation, such as industry digitalisation intensity, may have a significant impact on technology diffusion. Digitisation boosts cashless transactions, e-banking, digital fund transfers, etc., which help minimise process risks and reduce travel time and transaction costs (Chatterjee, 2020). This effectively breaks down barriers to interregional factor mobility, and facilitates frequent learning exchanges and knowledge sharing among R&D personnel, thus promoting technology diffusion. In addition, the relative digital intensity of different regions may play an important role in determining whether innovation adopters in the region will use locally developed technologies or whether adopters will rely on technologies developed in other regions, thereby affecting technology diffusion.

Second, the innovative capability of digitisation mediates the relationship between green digital finance and technology diffusion. It would reconfigure the distributed business model, and determine the cooperation of innovative subjects in the distributed innovation network (Hui et al., 2023), thus influencing the diffusion of technology. A strong inventive capacity may produce a radiation effect that effectively promotes technological innovation in neighbouring regions. However, regions with less digital innovation capacity are more dependent on technology transfer from other regions (Losacker et al., 2023). Besides, the promotion effect of the digital economy on green technological innovation will cause imitation and learning in geographically neighbouring regions or regions with similar economic conditions (Fagerberg and Verspagen, 2002).

Third, the digital economy can contribute to technological diffusion by alleviating communication costs and information asymmetry. Poor information quality or asymmetric information environment may lead to underinvestment in innovation activities, and prevent the effective transfer of innovative technology (Amin et al., 2023; Mariotti et al., 2010). Digital technology penetrates the process of information collection, transmission, analysis, and application, expanding the sources of information, enhancing the ability to analyse information, and mitigating information asymmetry (Sun et al., 2022). Therefore, the digital economy makes more data available more cheaply, quickly and accurately, thus reducing the cost of matching information and promoting technology diffusion (Francis et al., 2009; Liu et al., 2018). Hence, this study proposes the following hypothesis:

Hypothesis 2: Green digital finance promotes technology diffusion by fostering a digital economy through the level of digitisation, innovative capability and communication cost.

Green digital finance, market integration, and technology diffusion

Green digital finance can scale sustainable finance, drive environmentally sustainable growth, and promote market integration (Hui et al., 2023), thereby expanding the scale and quality of trade. First, green digital finance advances more resource-efficient consumption and production patterns, unlocks new sources of finance, and enables new business models in environmentally friendly sectors. It makes full use of the radiation and decentralisation functions of growth poles to rationalise resource allocation and reduce regional disparities (Huang et al., 2022). Second, green digital finance increases the scale of external financing for disadvantaged enterprises under information friction. It provides a signalling mechanism for exporting enterprises excluded by traditional finance to obtain financing, and reduces financing costs (Jagtiani and Lemieux, 2018). Third, green trade barriers comprise a series of green requirements and restrictions on product exports. Green digital finance would promote green innovation and technology, thus meeting environmental requirements and overcoming green trade barriers (Wang et al., 2023).

Trade is an important pathway for technology diffusion (Halleck-Vega et al., 2018), which is reflected in both trade volume and trade intensity (Fracasso and Vittucci Marzetti, 2015). Lowering trade barriers, especially in developing countries, can trigger faster diffusion of technology (Fadly and Fontes, 2019). First, trade enables firms to obtain high-tech products from other regions, which greatly increases the likelihood of technology spillovers (Feng et al., 2019; Vujanović et al., 2022). Second, trade in intermediate products reduces enterprises’ costs, allowing them to invest more in innovation activities, thus promoting technology diffusion (Xu and Chiang, 2005; Ayerst et al., 2023). Third, trade in final products increases the competition faced by enterprises, forcing them to increase innovation and productivity levels (Bloom et al., 2016), thus facilitating technology diffusion. Hence, this study proposes the following hypothesis:

Hypothesis 3: Green digital finance facilitates technology diffusion by promoting market integration.