Technology in Society 72 (2023) 102200

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Technology in Society
journal homepage: www.elsevier.com/locate/techsoc

Do digital inclusive finance, innovation, and entrepreneurship activities

stimulate vitality of the urban economy? Empirical evidence from the
Yangtze River Delta, China☆
Yanan Sun a, b, Xiaotong You b, *
a
Business School, Hohai University, Nanjing, China
b
Economics and Management School, Nantong University, Nantong, China

A R T I C L E I N F O A B S T R A C T

Keywords: This research empirically analyzes the impact of digital inclusive finance on urban economic vitality in Yangtze
Digital inclusive finance River Delta, China. The findings are as follows. 1) The development of digital inclusive finance significantly
Innovation and entrepreneurial activity boosts the economic vitality of urban areas. 2) The promotion effect of digital finance on urban economic vitality
Urban economic vitality
varies regionally, as such vitality is more strongly impacted by the overall degree of digital inclusive finance
development in core areas than it is by that in non-core areas. 3) The economic impact of digital inclusive finance
has a clear spatial spillover, whereby an increase in digital financial inclusion in one region boosts the economic
vitality of neighboring regions. 4) The total levels of innovation and entrepreneurship, entrepreneurial activity,
and innovation activity all have a double threshold effect in the threshold model, indicating that digital inclusive
finance has a leapfrog-promoting influence on urban economic vitality via an increase in innovation and
entrepreneurship levels. Future developments in digital technology should therefore be fully embraced, and the
state of inclusive digital finance should be enhanced. Governments and relevant authorities can target to advance
the leadership roles of innovation and entrepreneurship and raise the contribution of mass entrepreneurship and
innovation to urban economic growth.

1. Introduction research literature. According to him, urban vitality is the manifestation

The 14th Five-Year Plan covers the window of China’s new journey
to create a fully socialist modern nation, but the unexpected onset of
COVID-19 in 2020 has had a significant influence on its economy,
sending the world into a deep recession. China’s economic development
is currently under the triple pressure of contracting demand, supply
shocks, and eroding expectations due to the negative effects of the
epidemic domestically and the more severe and complex international
environment. As a result, social development is also experiencing new
challenges and difficulties. On this basis, the concept of economic vi­
tality comes into being, which refers to the ability and potential of
economic development and is an important part of regional competi­
tiveness [1]. Therefore, stimulating economic vitality is important for
maintaining economic stability and realizing long-term economic
growth.
Jacobs (1961) was the first person to coin the term ‘vitality’ in
of urban diversity, which he defined as the process of blending human
activities and living spaces [2]. Urban vitality has been studied in a
variety of ways, including with both spatial and spatio-temporal vitality
features [3,4]. To assess urban vitality at both the national and local
levels, Jin et al. (2017) merged DMSP/OLS night light remote sensing
data with data from many sources [5]. It is worth mentioning that
economic growth is what propels urban expansion, and human social
interactions are what give cities their vibrancy [6].
A city’s vitality is inextricably linked to the social and economic
activities of its residents [7]. Population size and business vitality are the
two most crucial components of economic vitality [8], which itself is a
crucial component of regional comprehensive competitiveness. There
are still, however, significant regional differences in many countries
regarding economic vitality due to various factors, including policies,
levels of development capability, and geographic conditions. Existing
research has presented quantitative analysis of urban economic vitality

☆
http://www.gov.cn/zhengce/content/2016-01/15/content_10602.htm.
* Corresponding author.
E-mail addresses: sun.yn@ntu.edu.cn (Y. Sun), xtyou@foxmail.com (X. You).

https://doi.org/10.1016/j.techsoc.2023.102200
Received 13 August 2022; Received in revised form 13 January 2023; Accepted 14 January 2023
Available online 16 January 2023
0160-791X/© 2023 Elsevier Ltd. All rights reserved.
Y. Sun and X. You
and its driving forces from the standpoint of human spatial behavior [9,
10]. To maintain economic stability and boost regional competitiveness,
it is therefore crucial to understand the elements that affect economic
vitality and to research the major measures to improve them.
Representing the emergence of the new technology revolution, dig­
ital technologies like the Internet, big data, blockchain, and cloud
computing have continued to permeate the financial industry and
particularly digital finance [11]. As a new generation of information
technology and traditional finance enterprises integrate new business
models and new models, digital inclusive finance has turned into one of
the most active sectors in China and has gradually driven high-quality
social and economic development and increased national competitive­
ness. Through facial recognition, identity verification, and other tech­
niques, digital finance can carry out operations like remote account
opening, fund issuing, and recycle. Due to its inclusive nature, this type
of financing service without physical contact is able to effectively cross
the threshold of traditional financial services, benefiting those groups
that the traditional financial system had previously excluded [12,13]. It
also greatly reduces transaction costs and information asymmetry be­
tween borrowers and lenders, plays a crucial role in enhancing the
financing environment for small- and micro-size firms, encourages
consumption, supports mass entrepreneurship and innovation, and
helps to eliminate discriminatory lending in the traditional financial
market.
The majority of related research focuses on the connections between
the rise of digital inclusive finance and industrial structure trans­
formation and modernization [14–18], high-quality economic devel­
opment [15,19–22], social employment [23–25], innovation capacity
[26–31], and total factor productivity [32–36]. The literature has given
this topic crucial theoretical and empirical references, but few have
addressed the connection between digital financial inclusion and urban
economic vitality. Research on the mechanism connecting the two is
scant and has not taken into account any potential geographical vari­
ability, spatial effect, or threshold effect. According to the economists
Schumpeter and Backhaus (2003), business owners’ inventive and
entrepreneurial endeavors constitute a key engine for economic growth
[37]. The subjects of innovation and entrepreneurship in China have
been expanding under the new normal, driven by the government
“expanding [its] employment development strategy and promoting
employment driven by entrepreneurship”, while “mass entrepreneur­
ship and innovation” have gradually become a new engine to promote
the nation’s economic transformation and upgrading. Can digital in­
clusive finance increase the vitality of the urban economy at this point in
China’s economic development? Can it contribute to the growth of
urban economic vitality by fostering entrepreneurship and innovation?
In order to investigate the fundamental logic of how the expansion of
digital finance affects urban economic vitality, this research undertakes
an empirical test based on theoretical analysis to seek answers.
The contributions of this study to the literature are as follows. First,
using the Yangtze River Delta region as the research area, we investigate
the direct impacts of digital inclusive finance and its three sub-
dimensions of coverage, depth of use, and digitalization level on
urban economic vitality through city statistics, remote sensing satellite,
and other multi-dimensional data. Second, the current literature is
insufficient in regards to a thorough analysis of the spatial spillover ef­
fect of urban economic vitality. Therefore, we employ a spatial econo­
metric model to look at the spatial spillover effect of digital inclusive
finance on economic vitality. Third, to further understand the non-linear
relationship between digital inclusion finance and urban economic vi­
tality, this study applies the threshold model to analyze the function of
innovation and entrepreneurial activities as well as their two sub-
dimensions.
2
Technology in Society 72 (2023) 102200
2. Theoretical analysis and research hypotheses
2.1. Impact of digital inclusive finance on economic vitality
Countries have pushed the development of digital inclusive finance
and related services ever since the United Nations first coined the phrase
“inclusive finance” in 2005. In a 2015 government work report China
stated that it would “vigorously expand inclusive finance” and then
released a paper, Promoting Inclusive Financial Development
(2016–2020).1 The economic effects of digital financial inclusion have
been widely discussed in the academic community, and although the
research perspectives and methods are different, it is generally believed
that digital financial inclusion helps promote economic development
[38,39]. The fusion of inclusive finance and digital technology also has
the potential to expand the reach of financial services and make it
possible for underserved communities, businesses, and regions to access
funding [40]. Financial support for innovative small- and medium-sized
enterprises (SMEs) further stimulates the production vitality of the pri­
vate economy and improves supply in the real economy. Financing
challenges like difficult and expensive financing may hence be effec­
tively overcome. The ability of locals to consume will be encouraged
when the financial needs of low-income groups are satisfied, which will
subsequently increase domestic demand and spur economic growth
[41].
Because financial institutions are part of a profit-seeking industry, it
is challenging for rural areas to find adequate financial backing.
Compared with the traditional financial system, digital inclusive finance
is a new digital financial model to achieve inclusive financial services
and a financial system that effectively and comprehensively provides
services to all social strata and groups [42], thus significantly affecting
rural financial needs and promoting consumption [43]. Particularly
during an epidemic such as COVID-19, digital financial services are able
to penetrate into various aspects of agricultural production, distribution,
circulation, and consumption, offering a strong guarantee for balanced
development. The variety of financial scenarios and financial service
platforms that arise can also effectively reduce information asymmetry
within financial institutions, lower the risks and acquisition costs asso­
ciated with providing financial services, realize the efficient use of
financial resources, and boost the effectiveness of economic activity.
Therefore, this paper presents hypothesis H1.
H1. Digital inclusive finance has a direct contribution to the economic
vitality of cities.
2.2. Spatial spillover effect of digital inclusive finance on urban economic
vitality
Researchers have started to look into how geographic elements affect
economic activity in recent years, thanks to the development of modern
economic geography. Shen et al. (2021) [44] argued that financial
agglomeration generates spatial spillover effects and drives greater
productivity in the surrounding areas. Given that the evolution of digital
inclusive finance is cumulative and the first law of geographical eco­
nomics states that economic levels closely correlate in terms of spatial
distance, spatial transmission may be a characteristic of digital inclusive
finance as it exerts economic effects, which we shall note below.
First, the radiation effect. The boundaries of geography have been
breached by the development of digital technology. Universality, broad
coverage, cheap cost, and high efficiency are traits of digitally-
connected financial services that reduce the impact of distance on
financial spillover effects. The probability of spatial spillover of digital
finance considerably increases with the reduction of spatial friction,
which then promotes the economic vitality of surrounding areas.
1
http://doi.org/10.18170/DVN/PEFDAS.
Y. Sun and X. You
Second, the competition effect. Digital inclusive finance has eco­
nomic spatial spillover effects mainly from the unique promotion
mechanism of local government officials in China. These officials take
the relevant indices of regions with a similar background and economic
strength as a reference basis for their own political assessment. Driven
by the competition effect, regions with similar geographic distances and
economic development have an incentive to raise their digital finance or
economic level by means of imitation learning or increasing policy
support.
Third, the trickle-down effect. The premise of this is that there are
obvious differences in resource factor endowments among regions.
Under the polarization effect, big cities with a factor endowment
advantage promote the development of digital inclusive finance. Based
on their own development or industrial expansion needs, rational eco­
nomic men will look for new markets. This is done through demon­
stration, imitation, output of advanced technology, and management
experience, which lead to the economic effects of digital inclusive
finance as a form of spillover across regions [45]. From the foregoing
analysis, this paper re-examines the relationship between digital inclu­
sive finance and urban economic vibrancy from the perspective of
spatial association and presents hypothesis H2.
H2. Digital financial inclusion has a significant spatial spillover effect
during the process of promoting urban economic vitality.
2.3. Non-linear effects of digital inclusion finance on urban economic
vitality
The non-linear impacts of digital inclusive finance on urban eco­
nomic vitality are examined in this part from the perspective of inno­
vation and entrepreneurship. On the one hand, entrepreneurial activity
is the process of integrating various resources to create value, which
inevitably requires financial support. Digital inclusive finance offers
entrepreneurs the necessary capital and other resource elements [46].
On the other hand, entrepreneurial activity also alters the original
business model, creating a digital ecosystem of “production service +
business model + finance service” and fostering an environment that is
conducive to entrepreneurship. In addition, digital finance is a financial
service based on Internet platform and information technology. It has
the characteristics of digitization and informatization, which connect
two spaces online and offline, enrich the dimensions and boundaries of
entrepreneurs’ market information, and provide advanced means for
entrepreneurs to identify entrepreneurial opportunities. Digital inclu­
sive finance reduces the cost and expense of accessing information in the
entrepreneurial process, boosting the motivation of business owners to
launch their own ventures. In other words, digital inclusive finance
promotes entrepreneurial activities by easing information constraints
[47].
From the supply side, digital inclusive finance can penetrate deeply
into financial service groups with the aid of digital technology tools like
big data and cloud computing, identify the inventiveness of businesses,
lower the financing threshold, reduce information asymmetry between
innovative subjects and financial institutions, and offer financial ser­
vices to SMEs with innovative prospects. Thus, financial support for
innovative activities increases, and the innovation vitality of innovation
subjects is stimulated [48,49]. From the demand side, with the growth of
digital inclusive finance, residents can obtain more loans and thus their
consumption demand is constantly expanding. Moreover, consumers’
pursuit of product diversification and individuation has become more
obvious, encouraging producers to engage in innovation activities aimed
at upgrading products and enhancing production capacity. Due to the
forward and backward correlation effect of the industry, innovation
subjects in the upstream and downstream of the industrial chain will
also engage in innovation behaviors in order to match the production
and business activities of the leading innovation subjects, thus finally
realizing overall innovation and upgrading.
3
Technology in Society 72 (2023) 102200
Innovation and entrepreneurship initiatives both boost a region’s
economic viability [50,51]. On the one hand, they encourage more in­
dividuals to launch new enterprises, create new goods, and expand into
new markets, which more effectively push up consumption and eco­
nomic growth. On the other hand, research has demonstrated that the
endogenous driving force of economic growth originates from entre­
preneurial activities, which can realize the transformation and upgrad­
ing of local industrial structures, enhance economic efficiency, and
promote inclusive growth [52]. Through mechanisms covering evolu­
tion, diffusion, and scale effects, innovative activities also have a
favorable impact on companies, industries, and regional innovation.
When businesses innovate technologically, they increase their revenues
and benefits, which encourage other businesses to copy them and spur
further innovation. The creative potential of the entire society is fostered
in an environment where everyone is encouraged to innovate, thus
helping to drive overall socioeconomic development.
Innovation is important in a similar vein for industrial sector growth
and can help with reorganization of the economy and industry. Inno­
vation has led to more and more advanced technologies, as numerous
modern goods are developed due to ongoing technical advancements.
Because of new products’ better potential for profitability, producers are
motivated to alter both their initial investment structures and industrial
structures. Additionally, the development of specialized and socialized
production is facilitated by technological advancement brought about
by innovation. Outdated methods of manufacturing are replaced, and
economic resources can be better allocated and used, fostering economic
progress. In conclusion, growth in digital inclusive finance has a sub­
stantial positive impact on cities’ economies, and this effect becomes
more pronounced as innovation and entrepreneurship increase. There­
fore, hypothesis H3 is now offered.
H3. Digital financial inclusion enhances the economic vitality of cities
through innovative and entrepreneurial activities, and its impact has a
non-linear characteristic of expanding the marginal effect.
3. Research approach
3.1. Data sources and descriptive statistics
This research takes the Yangtze River Delta region’s prefecture-level
cities as the study object for the period 2011–2020. With a total of 41
cities, this region covers the entire areas of Shanghai, Jiangsu Province,
Zhejiang Province, and Anhui Province, according to the Outline of the
Yangtze River Delta Regional Integrated Development Plan that was
approved by the State Council in 2019. The region’s core area mostly
consists of the following cities: Shanghai, Nanjing, Suzhou, Wuxi,
Changzhou, Zhenjiang, Yangzhou, Nantong, Yancheng, Taizhou,
Hangzhou, Ningbo, Wenzhou, Huzhou, Jiaxing, Shaoxing, Jinhua,
Zhoushan, Taizhou, Hefei, Wuhu, Ma’anshan, Tongling, Anqing, Chuz­
hou, and Chizhou. The National Oceanic and Atmospheric Administra­
tion (NOAA) and Harvard Dataverse (https://dataverse.harvard.edu/)
supply data on night lights of remote sensing that are utilized to assess
the economic vitality of urban areas. This study employs the Peking
University Digital Inclusive Finance Index (2011–2021), which is
created by Peking University’s Digital Finance Research Center and also
includes the scope of coverage, depth of use, and degree of digitalization
of digital inclusive finance. The activities of innovation and entrepre­
neurship are measured by the mean index score of urban entrepre­
neurship and innovation in the report, China Regional Innovation and
Entrepreneurship Index (1990–2021), released by Peking University.
The CElnet Statistics Database, the China City Statistical Yearbook, and
prior years’ statistical yearbooks of different provinces are the main
sources of other data. Missing data are filled in using the interpolation
approach. Table 1 lists the descriptive statistics of the key variables.
Y. Sun and X. You
3.2. Variable setting
3.2.1. Explained variable: Urban economic vitality (light)
This paper characterizes the explained variable through the vitality
of urban economic development. The economic vitality of prefectures in
the Yangtze River Delta is measured using night light data [53].
Acquisition of our night light data comes from the study of Chen et al.
(2012) [54]. Their study developed an auto-encoder (AE) model,
including convolutional neural networks to integrate DMSP-OLS NTL
and NPP-VIIRS NTL data, and generated an extended time series of
global annual NPP-VIIRS-like NTL data. The higher the value is of the
night light data, the higher is the economic activity of the area. Night
light data are acquired based on optical remote sensing technology that
detects low light level and has the characteristics of wide coverage and
easy acquisition. Compared to GDP, night light data can reflect the
change of urban economic vitality more accurately and objectively.
3.2.2. Explanatory variables
Digital inclusive finance (Dige). The China Digital Inclusion Index,
issued by the Digital Finance Research Center of Peking University, is
currently the primary indicator for gauging digital inclusion finance.
The index comprehensively evaluates the development level of digital
inclusive finance from three dimensions, including coverage breadth,
usage depth, and digitization level, and uses scientific measurement
methods to accurately describe the development of digital finance at the
current stage in China. It has been unanimously recognized by the ac­
ademic community and widely applied. As a result, this work follows the
lead of other researchers and takes the prefecture-level city inclusive
finance index created by the Digital Finance Research Center of Peking
University as a substitute variable for the digital finance market [41].
3.2.3. Threshold variables
Entrepreneurial activity (Ea). In this study we quantify the inno­
vation and entrepreneurship activity of cities using the total innovation
and entrepreneurship index from the China Regional Innovation and
Entrepreneurship Index (1990–2021) created by the Center for Enter­
prise Big Data Research at Peking University.1 The report uses big data
analysis and thinking techniques to produce the total score index of
urban innovation and entrepreneurship and provides a per capita score
index and other index scores. Additionally, this paper takes the entry
index of new enterprises in the report as the measure of entrepreneurial
activity and the score of the number of patents granted as the measure of
innovation activity. A higher index score means higher activity.
3.2.4. Control variables
The control variables are mainly selected to measure the impact on
urban economic dynamics, such as urbanization rate (Ur) [55], popu­
lation density (Pd) [56], government intervention (Pge) [57], measured
by the share of government fiscal expenditure in GDP, and openness to
the outside world (Open) [58], characterized by the share of total import
and export trade in GDP. Generally speaking, the higher the urbaniza­
tion level of a country or region is, the greater is the concentration de­
gree of production factors and the better are the economic benefits.
3.3. Construction of empirical model
3.3.1. Baseline regression analysis
∑ term.
Lightit = α0 + α1 Digeit + Controlit + μi + vt + εit (1)
Here, Lightit is the explained variable urban economic vitality. Digeit
is the explanatory variable for digital financial inclusion development
level. Controlit are other control variables. μi is the individual fixed ef­
fect. vt is the time point fixed effect, and εit is a random disturbance
term.
4
Technology in Society 72 (2023) 102200
3.3.2. Analysis of spatial spillover effects
This study takes into account the cross-regional flow of production
factors such as labor, capital, and technology in innovation and entre­
preneurial activities, the spillover effect of digital financial inclusion,
and the spatial correlation characteristics of economic development. It
uses the 0–1 spatial weight matrix [59] and the economic distance
spatial weight matrix [60] to analyze the spatial correlation character­
istics of the economic vitality of cities in the Yangtze River Delta region.
The spatial weight matrix is as follows.
{
1, region i is adjacent to region j
Wijd = (2)
0, region i is not adjacent to region j
{ /⃒ ⃒
1 ⃒Yi − Yj ⃒, i ∕
=j
Weij = (3)
0 ,i = j
Equation (I) of Wijd is the geographic distance matrix, where d refers
to the distance between city i and city j, which is usually expressed as a
straight-line distance between the two centers or seats of government.
Equation (II) of Wije is the economic distance matrix. Here,
∑
Yi = tt10 Yij /(t1 − t0 +1) is the mean per capita GDP of area i during the
∑
observation period, Y j = tt10 Yij /(t1 − t0 +1) is the mean per capita GDP
⃒ ⃒
of area j during the observation period, and ⃒Y i − Y j ⃒ is the absolute value
of the difference in GDP per capita between the two cities. In order to
facilitate calculation and interpretation of the results, the spatial weight
matrix is standardized in practical application.
∑
N
Lightit = β0 + ρWijt Lightit +β1 Wijt Digeit + β2 Digeit + δk Wijt Controlitk
it
∑
+ ϑitk Controlitk + μi + vt + εit
(4)
In equation (2), Lightit is the economic vitality of city i in period t.
Digeit denotes the digital financial inclusion index. Controlitk represents
control variable k, and ρ is the spatial autoregressive coefficient. Wijt is
the spatial weight matrix j, μi and vt are the fixed effects of region and
time, respectively, and εit are the random perturbation terms.
3.3.3. Panel threshold model
Due to obvious heterogeneity in each region’s level of economic
development, the significance of innovation and entrepreneurship ac­
tivity in the impact of digital financial inclusion on economic vitality
varies for different locations and at different times. To describe such a
non-linear effect, this paper draws on the static panel threshold model
proposed by Hansen (1999) for analysis [61]. First, the Bootstrap
method is utilized to obtain the F statistic and P value and to test
whether the threshold effect exists, the number of threshold variables,
and the optimal threshold value.
Second, the great likelihood ratio statistic LR(γ) is constructed to
determine the threshold value. The number of thresholds can be set as a
single threshold or multi-thresholds due to different degrees of influ­
ence. The specific model is as follows.
Yit = μi + β1 xit I(qit ≤ γ) + β2 xit I(qit > γ) + εit (5)
Here, i and t denote city and year, respectively, μi are eigenvalues,
I()˙ is an indicative function, γ denotes the threshold value, qit is the
threshold variable, and εit ∼ iidN（0，δ2 ） is the random disturbance
Since the threshold model may have several threshold values, this
study uses the innovation and entrepreneurship index as the threshold
variable to create the dual-threshold model shown below:
Lightit = αi + φ1 Digeit • I(Eait ≤ γ 1 ) + φ2 Dige • I(γ 1 ≤ Eait ≤ γ2 )+φ3 Digeit
∑
• I(Eait > γ 2 ) + φn Controlit + εit
(6)
Y. Sun and X. You Technology in Society 72 (2023) 102200

improvement at ensuring people’s well-being not only creates more

Lightit = βi + θ1 Digeit • I(Entrepreneurshipit ≤ γ1 ) + θ2 Dige
effective demand, fosters new economic growth points, and promotes
• I(γ1 ≤ Entrepreneurshipit ≤ γ 2 )+θ3 IDFIit • I(Entrepreneurshipit > γ 2 ) social justice and all-round human development, but also effectively
∑
+ θn Controlit + εit aligns with economic development to better unleash the potential of the
(7) domestic market and inject lasting impetus into economic advancement.
According to the endogenous economic growth hypothesis, public
Lightit = μi + π1 Digeit • I(Innovationit ≤ γ1 ) + π2 Dige spending produced by the government has a favorable effect on eco­
nomic growth. First, the expenditure on purchases increases social de­
• I(γ1 ≤ Innovationit ≤ γ2 )+π3 Digeit • I(Innovationit > γ2 )
∑ mand as a whole and hence encourages the development of linked
+ πn Controlit + εit (8) industries. Second, fiscal expenditure based on the construction of
various public infrastructure improves the production efficiency of so­
Here, αi , βi , and μi are the constants in the regression of the total
cial capital and promotes economic development. Government invest­
innovation and entrepreneurship index, entrepreneurship, and innova­
ment in relevant industries attracts social capital to invest in them, so as
tion index as threshold variables, respectively. φ, θ, and π are the corre­
to provide more financial support for industrial development and to
sponding regression coefficients, respectively, γi is the threshold value
promote economic vitality.
to be estimated, and controlit are the control variables.
The coefficient of the total import and export trade share is signifi­
cantly negative, indicating that continuous expansion of foreign trade
4. Empirical results
inhibits the economic vitality of cities. To be more specific, the Yangtze
River Delta has a typical open economy, with the United States, the
4.1. Baseline regression results
European Union, and other developed regions serving as its primary
import areas and export destinations. Processing trade is predominant in
The research object of this paper is 41 prefecture-level cities, and the
the Yangtze River Delta region, but its huge amount has made depen­
research period is 10 years. It presents a type of short panel data with
dence on foreign trade in the region too high. This means strong
many individuals and a short time period. To increase the robustness of
dependence on the external environment, resulting in many problems.
the regression results, the study refers to Hoechle (2007) and adopts the
One problem is the Yangtze River Delta has not yet formed a world-
Driscoll-Kraay standard error estimation method [62]. The baseline
class and complete industrial chain, from product design, technology
regression results appear in Table 2, where columns (1) and (2) compare
research and development, product manufacturing to brand building,
the regression results of digital inclusive finance on urban economic
logistics distribution, and other complete high-level industrial chain.
vitality before and after adding control variables, respectively. The re­
Many industrial links in the Yangtze River Delta are in the middle and
sults show that the regression coefficients of digital inclusive finance
lower reaches of the international division of labor and the global in­
before and after adding control variables pass the significance test and
dustrial chain, as well as the bottom of the “smile curve”. In addition, the
are positive, indicating that the development of digital finance helps to
Yangtze River Delta region’s key core technology source capacity is still
promote urban economic vitality in the Yangtze River Delta. Hypothesis
insufficient.
1 is thus supported.
Another problem in recent years is that increasing international
Columns (3) to (5) report the effects of the depth of use, the breadth
trade frictions and deteriorating global financial environment, com­
of digital inclusive finance coverage, and the level of digitalization on
bined with the outbreak of COVID-19 since 2020, have raised uncer­
urban economic vitality. They that the regression coefficients for the
tainty and slowed down growth of the world economy. In general, the
total index of digital financial inclusion, coverage breadth, use depth,
weak links in the development of the Yangtze River Delta combined with
and degree of digitalization are all significantly positive, meaning that
the volatile external market environment make economic advancement
the digital financial inclusion index and its three sub-dimensions have a
of the Yangtze River Delta (which is too dependent on foreign trade or
significant role in promoting the development of urban economic vi­
grows too fast) greatly affected by economic fluctuations of related
tality. However, by comparing the regression coefficients of each
countries and regions. Its economic development suffers a certain degree
dimension, we see that the three factors have different effects on the
of impact, and the vitality and momentum of economic growth are not
development of urban vitality. Among them, the promotion effect of
enough.
depth of use is the most obvious, followed by breadth of coverage, and
the level of digitalization as the least obvious.
4.2. Robustness and endogeneity test
According to the regression results of the control variables, the
higher is the proportion of population density and government financial
In order to more accurately evaluate the relationships among digital
expenditure, the stronger is the city’s economic vitality. The driving
financial inclusion, innovation and entrepreneurship activity, and urban
effect of population density on urban economic vitality is shown by the
economic vitality, this paper adopts replacement variables, replacement
fact that higher population density reduces unit costs and improves the
estimation methods, and exclusion of special values to conduct robust­
efficiency of transportation, markets, and communication exchanges,
ness checks. It also uses the instrumental variable method to conduct an
thus generating economies of scale, facilitating the development of
endogeneity test.
specialization and diversification, and boosting economic growth.
The regression coefficient of the proportion of government fiscal
4.2.1. Replacement of the explained variable
expenditure to GDP (Pge) is significantly positive, indicating that the
This study uses gross domestic product (GDP) (trillion RMB) as a
increase of government fiscal expenditure helps improve the vitality of
replacement variable for urban economic vitality [63] and performs
urban economic development. Due to the deterioration of the interna­
robustness tests on the baseline regression results, because GDP is also a
tional economic environment and the transformation and development
relatively objective indicator that can measure the economic vitality of
of the domestic economy, downward pressure on the economic growth
cities. Columns (1)–(4) in Table 3 respectively report the regression
of the Yangtze River Delta region and even China has distinctly
results of the total index of digital financial inclusion and three
increased in recent years along with the contraction of the market
sub-dimensions of coverage breadth, use depth, and digitization level on
economy and a weaker foundation of consumerism. From public data,
urban economic vitality. All coefficients pass the significance test and
the general public budget expenditure in the Yangtze River Delta is on
are positive. Among the three sub-dimensions, the regression coefficient
the rise, among which spending on people’s livelihood has become a
of depth is the largest, that for coverage breadth is second, and the
rigid part of fiscal expenditure and continued to grow. Constant
regression coefficient of digitization degree is the smallest. This

5
Y. Sun and X. You
conclusion is basically the same as the previous findings.
4.2.2. Replacement estimation method
To reduce possible problems of the model such as within-group
heteroskedasticity and contemporaneous serial correlation, this sec­
tion regresses the sample again using panel correction standard error
(xtpcse) and feasible generalized least squares (fgls) on the basis of the
fixed-effects model. Columns (5) and (6) of Table 3 report the estimation
results of xtpcse and fgls, respectively. The regression coefficients of the
development level of digital inclusive finance remain significantly pos­
itive, indicating that digital inclusive finance helps enhance the devel­
opment dynamics of the urban economy, which is consistent with the
foregoing conclusion and makes the study results robust.
4.2.3. Excluding special values
Considering the uneven socio-economic development among the 41
cities in the Yangtze River Delta, especially Shanghai as a municipality
directly under the central government with special political status and
economic functions, the development base is too large compared with
other cities. This may cause the intraregional gap in the development of
digital inclusive finance to be too large. Therefore, this paper excludes
the municipality directly under the central government. Column (7) of
Table 3 shows the test results of the re-regression after excluding
Shanghai. The estimated results show that the coefficients of digital
inclusive finance variables are all significantly positive. The promotion
effect of digital inclusive finance on the economic vitality of cities still
holds after excluding the special values.
4.2.4. Instrumental variable method
The above empirical analysis controls for individual and time point
effects, which can effectively solve some endogeneity problems caused
by omitted variables. To overcome the endogeneity bias more effec­
tively, this paper adopts the instrumental variable method to further
deal with the endogeneity problem by selecting appropriate instru­
mental variables for the core explanatory variables. The growth of the
Internet has led to digital financial inclusion. According to other aca­
demic scholars, the rise of fixed-line phones served as the initial catalyst
for the expansion of the Internet. Therefore, areas with a high fixed-line
phone penetration rate exhibit good development of digital finance.
Additionally, before the rise of the Internet, the majority of information
was sent via postal mail, and the location of post offices has some
bearing on how digital inclusive finance is currently developing.
Considering the changes in the administrative divisions of cities and
combining with data availability, this paper uses historical data of the
number of fixed-line phone subscribers and total postal business (billion
RMB) in 2000 as the instrumental variables of digital inclusive finance to
satisfy the exclusivity requirement. However, since the original data of
the selected instrumental variables are in cross-sectional form, which do
not change over time and cannot be directly used for analysis as panel
data, they are further combined with the approach of Nunn and Qian
(2014) [64] to interact the instrumental variables with the Internet
penetration rate of the previous year to make them instrumental vari­
ables with time effects. The instrumental variables are denoted as iv1
and iv2.
The validity of the chosen instrumental variables must be tested
before utilizing the instrumental variable approach for regression,
which is verified in this paper from the following two aspects. First, after
controlling all control variables and double fixed effects, the IV-2SLS
method is used as an estimate. Findings show that digital financial in­
clusion still has a significantly positive impact on urban economic vi­
tality, and the estimated coefficient is larger than that of Driscol-Kraay.
This indicates that the previous benchmark regression underestimates
the promoting effect of digital financial inclusion on urban economic
development. The P value of the overidentification test for the instru­
mental variables is 0.5193, which accepts the null hypothesis that all the
instrumental variables are exogenous, indicating that the selected
6
Technology in Society 72 (2023) 102200
instrumental variables meet the exogeneity requirements. The F-statistic
value of the first stage is 23.914, or much higher than the critical value
under 10% bias, denoting a significant correlation between the instru­
mental variables and the endogenous explanatory variables - that is,
there is no weak instrumental variable problem.
Noting the possible heteroscedasticity problem in the model regres­
sion, the fixed effect GMM is used for further estimation, where the
Anderson Canon. Corr. Lm statistical value is 48.514, and the P value is
less than 0.05, meaning that the model does not have the problem of
insufficient identification. The model does not suffer from the issue of
weak instrumental variables, according to the test findings of the Cragg-
Donald Wald F statistic. From Sargan statistics, every instrumental
variable is exogenous. The selection of instrumental variables is
reasonable under both estimation results, and the regression coefficients
of digital inclusion finance are significantly positive for both, indicating
that the promotion influence of this factor on urban economic vitality
still exists.
4.3. Regional heterogeneity analysis
As one of the areas with the most dynamic economy, the highest
degree of openness, and the strongest innovation capacity in China, the
Yangtze River Delta region has seized the window of digital economy
development. The new advantages of the digital economy have become
the key driving force to promote the high-quality integrated advance­
ment of the Yangtze River Delta, whose level of digital finance devel­
opment far exceeds that of other regions such as Bohai Rim and Pearl
River Delta. However, the gap of economic foundation and digital
finance level among cities in the Yangtze River Delta is obvious.
Therefore, this paper further discusses heterogeneity in the impact of
digital financial inclusion on urban economic vitality in central and non-
central areas.
All heterogeneity tests consider individual characteristics and time
point characteristics as well as relevant control variables. The group
regression results appear in Table 5, which show that the total level of
digital financial inclusion in the core area has a stronger effect on urban
economic vitality than that in the non-core area. Moreover, the three
dimensions of coverage breadth, use depth, and degree of digitalization
have significantly positive effects on urban economic vitality. In
contrast, the coefficients for the depth of digital financial inclusion and
the degree of digitalization in the non-core region fail to pass the sig­
nificance test, indicating that these two factors do not boost the devel­
opment of the urban economy in this region.
4.4. Analysis of spatial spillover effects
4.4.1. Spatial econometric model
The establishment of spatial econometric models reflects spatial
dependence to some extent, and the current spatial measures mainly
include spatial autoregressive (SAR), spatial error (SEM), and spatial
Durbin (SDM) models. Among them, the combination of the SAR model
and SEM can obtain SDM with unbiased estimation and higher degrees
of explanation. When making the selection of the specific model form,
the decision needs to be made based on the test results.
This study tests the applicability of the model and shows the results
in Table 6. First, under three different spatial weight matrices, the
Moran’s I index of economic vitality of each prefecture-level city in
2011–2020 passes the test at the 1% significance level, and the Moran’s I
index is greater than 0 but less than 1. This indicates that the distribu­
tions of high and low economic vitality of cities in the Yangtze River
Delta region are not random, but an interaction relationship exists
among regions with similar spatial characteristics, comparable eco­
nomic levels, and similar geographical distances.
Second, we apply the Lagrangian (LM) test to see whether there is a
spatial effect. The p-value of the LM test in Table 7 rejects the original
hypothesis, indicating that both the SAR model and SEM are applicable.
Y. Sun and X. You
Under the 0-1 adjacency distance weight matrix, the P-value of the
Hausman test strongly rejects the original hypothesis, indicating that the
fixed-effects model is selected. The LR and Wald tests determine whether
SDM will degenerate into the SAR model or SEM. The results (Table 6)
show that both are significant at the 1% level, and the spatial Durbin
model will not degenerate into the SAR model or SEM. Thus, we select
SDM as being optimal. Additionally, in the individual fixed effect,
temporal fixed effect, and double fixed effect tests, the double fixed
model should be chosen. Based on this, we use the spatial autoregressive
model, spatial error model, and spatial Dubin model as estimates and
analyze the direct, indirect, and total effects of this latter model. The
specific results are in Tables 8 and 9
4.4.2. Spatial panel regression estimation results
The regression results for OLS, SAR, SEM, and SDM are shown in
Table 8 in that order. The spatial Durbin model with space-time fixed
effect is the best one, according to the Hausman, LM, LR, and Wald
statistical tests. In particular, the spatial interaction coefficient of gov­
ernment expenditure share and external openness level and the spatial
autoregressive coefficient of urban economic development dynamics in
the spatial Durbin model are significantly positive, demonstrating that
there is not only an exogenous interaction effect of government expen­
diture and external openness, but also an endogenous interaction effect
of urban economic vitality between regions. The spatial autoregressive
coefficient of urban economic development vitality in the spatial Dubin
model is 0.5318, and the spatial interaction coefficient between the
share of government spending and the degree of opening to the outside
world is significantly positive. This suggests that there are both exoge­
nous and endogenous interactions between government spending and
opening to the outside world. However, after including the spatial effect,
the corresponding parameters of the explanatory variables cannot be
used to represent the marginal influence on the explained variables,
necessitating the use of the partial differential method to further break
down the spatial spillover effect into direct effect, indirect effect, and
total effect [65].
Based on the decomposition perspective of the spatial Durbin model,
the regression results of digital inclusive finance on urban economic
vitality appear in Table 9. In terms of direct effects, the coefficients of
digital inclusive finance, urbanization rate, population density, and
government fiscal expenditure share are 0.0313, − 0.0315, 0.0003, and
− 3.0972, respectively, and all of them pass the 1% significance test,
further verifying the above findings. In terms of indirect effects, the
coefficient of digital financial inclusion is positive and significant at the
10% level, indicating that the development of digital financial inclusion
is conducive to improving the economic development vitality of sur­
rounding areas. Thus, Hypothesis 2 is supported. The reason is that
Internet services have the advantage of being naturally unrestricted by
geography, which greatly compresses any distance in time and space,
making the effect break through the traditional boundaries of spatial
pattern, and so the cross-regional influence becomes very common.
The coefficients of government expenditure share and total import/
export trade share are 0.1407 and − 5.2635, respectively, and are sig­
nificant at the 1% level. They indicate that increasing government
intervention helps to enhance the economic vitality of other cities,
whereas expanding the opening to the outside world is not conducive to
the economic vitality of other regions. One possible reason for this is that
the spillover effect of a local government’s public inputs to neighboring
regions through factor flows and the positive spillover effect of a gov­
ernment’s fiscal expenditures, such as the trickle-down effect of infra­
structure construction and public education inputs, promote the
economic development of other regions.
According to the regression results of the spatial Durbin model, the
regression coefficient of digital inclusive finance is 0.0257, which passes
the 1% significance test, indicating that digital inclusive finance en­
hances the development vitality of the urban economy. This is consistent
with the results of a previous study. From the regression coefficients of
7
Technology in Society 72 (2023) 102200
other control variables, the coefficient of the urbanization rate is
− 0.0384 at the 1% significance level, which means that for every 1%
increase in this rate, the economic vitality of cities decreases by 3.84%.
Thus, the urbanization process inhibits economic development. This is
due to the past process of urbanization in China, the mechanism and
system to avoid the decline of fertility level are not perfect, leading to
the decline of the fertility rate in China, and the population structure
shows an inverted triangle shape. The shortage of working-age labor has
led to a decline in the growth rate of savings and capital. The negative
effects of population aging on technological innovation and human
capital have also become more obvious, and the economic growth rate
continues to decline. In this context, the mismatch between the urban­
ization process and the fertility level has a negative effect on economic
growth.
The urban population density coefficient is 0.0002, showing that
while an increase in urban population can stimulate economic growth,
the impact of this boost is minimal. The coefficient of government
expenditure as a share of GDP, which is used to describe government
involvement, is − 0.0220, but it fails the significance test. The regression
coefficient of the proportion of import and export trade in GDP is
− 2.0328, denoting that a rise in the degree of opening to the outside
world is not conducive to the improvement of urban economic vitality,
which is consistent with the above results.
4.4.3. Robustness test
The above estimates are obtained based on the adjacency matrix. In
order to verify the reliability of the spatial Durbin model estimation
results, the original spatial weight matrix is replaced by the economic
distance spatial weight matrix introduced in this paper to test the
robustness of the model. The results appear in Table 10, where the SDM
estimation results are still robust under different spatial weights.
4.5. Analysis of the regression results of the threshold model
To ensure the accuracy of the threshold when assessing the threshold
effect of innovation and entrepreneurship activity of digital financial
inclusion on urban economic vitality, one must conduct single threshold,
double threshold, and triple threshold tests sequentially in order. The
results in Table 11 show the self-sampling and threshold estimations
with the overall innovation and entrepreneurship index (Ea) as the
threshold variable. The findings note that the single threshold effect and
double threshold effect are significant at the 1% and 5% levels,
respectively. Self-sampling and threshold estimation results indicate
that the single threshold effect and double threshold effect are both
significant at the 10% level when entrepreneurship activity, represented
by a score for the number of new enterprises, is selected as the threshold
variable. In addition, the double threshold effect of patent grant score,
which represents innovation ability, also passes the significance test of
10%. In conclusion, the total index of innovation and entrepreneurship,
entrepreneurial activity, and innovation activity index values all have a
double threshold effect.
Table 12 reports the threshold estimation model. The regression re­
sults show that when the total level of innovation and entrepreneurship
is less than 98.2300, the regression coefficient of digital financial in­
clusion is 0.0050 and passes the significance test of 1%, indicating that
the digital financial inclusion index has a significantly positive impact
on the improvement of urban economic vitality. The regression coeffi­
cient of digital financial inclusion becomes 0.0085 when the overall
index of innovation and entrepreneurship is between 98.2300 and
99.8200 - that is, the economic vitality of the city will grow by 0.85% for
every 1% increase in the degree of digital financial inclusion. The pro­
motion effect of digital inclusive finance on the city’s economic vitality
will now increase even more. When the total innovation and entrepre­
neurship index exceeds the threshold value of 99.8200, the promotion
effect of digital inclusive finance on the vitality of the city’s economic
development will reach its maximum. The digital economic vitality of
Y. Sun and X. You
the city will increase by 1.76% for every 1% increase in the index of
financial inclusion.
When the level of innovation and entrepreneurship is low, the
boosting effect of digital inclusive finance development on urban eco­
nomic vitality is small, and the regression coefficient increases signifi­
cantly with a gradual increase of innovation and entrepreneurship.
Especially for regions with a better level of innovation and entrepre­
neurship development, the stimulating effect of digital inclusive finance
becomes more obvious. This is because the development of digital
financial inclusion can promote innovation and entrepreneurship of
enterprises and individuals by easing financing constraints and reducing
debt financing costs. In areas with outstanding innovation and entre­
preneurship capabilities, residents have a higher awareness and enthu­
siasm to participate in entrepreneurship, and the regions have stronger
innovation capacity, which helps spawn a large number of private SMEs.
More and more private SMEs enter the market, promote effective market
competition, and thus enhance the vitality of the market and the impetus
for development.
When the entrepreneurial level represented by the score of the
number of new enterprises is less than 95.4589, the estimated coefficient
of digital financial inclusion is 0.0046, which passes the significance test
of 1%. The estimated coefficient increases to 0.0075 when the entre­
preneurial score is between 95.4589 and 99.6448. When the entrepre­
neurial level is greater than 99.6448, the estimated coefficient is 0.0165,
which is significant at the 1% level. Compared with the estimated co­
efficient of the first threshold interval, the estimated coefficient of this
interval is larger. The regression coefficient of digital financial inclusion
in the three intervals shows an increasing trend, and the pulling effect on
economic vitality shows a non-linear increasing trend. This indicates
that the strengthening effect of digital finance on urban economic vi­
tality is significantly enhanced with the increase of entrepreneurial
capacity.
When the innovation score represented by the number of patents
granted is below 98.5906, the coefficient of digital financial inclusion is
estimated to be 0.0056 and significant at the 1% level. When it crosses
98.5906 and is less than the 99.6025 threshold, the coefficient of digital
financial inclusion is estimated to be 0.0093. Finally, when the score of
innovation ability crosses the threshold value of 99.6025, digital in­
clusive finance has the greatest effect on urban economic vitality
through innovation ability. Therefore, it can be judged that the level of
digital financial inclusion has a significantly non-linear positive impact
on the development of urban economic vitality, and this effect is more
obvious with the improvement of innovation ability. The reason is that
economic development is driven by producers recombining existing
factors of production in new ways like innovation. The stronger the
innovation ability is, the more obvious is the substitution effect. High
productivity enterprises will survive, while low efficiency enterprises
will be forced out of the market. The competition and substitution effect
brought by innovation becomes an important micro-level mechanism to
improve the vitality of the urban economy. In summary, Hypothesis 3 is
supported.
5. Discussion
The China government in recent years has been actively promoting
reform and innovation in the financial sector, especially encouraging the
deep integration of digital technologies such as big data, cloud
computing, and mobile Internet with the traditional financial industry to
give birth to new financial services and to promote the vigorous devel­
opment of digital finance. The development of digital inclusive finance
can effectively alleviate financing constraints, reduce information
asymmetry, and improve the limited space of financial service activities,
benefiting more people with its unique advantages. It clearly plays an
important role in promoting innovation [27], entrepreneurship [23],
and economic development [66].
Compared with existing studies, this paper is different in the
8
Technology in Society 72 (2023) 102200
following aspects. First, it explores the relationship between digital
financial inclusion and regional economic performance, but is not con­
strained like the existing literature is to economic growth [20,67–69] or
high-quality economic development [19,21,70]. Instead, this paper is
innovative by considering the use of night light data to measure the
vitality of the urban economy and to explore the role of digital financial
inclusion on such vitality.
Second, most existing studies only have considered the direct impact
of digital financial inclusion on economic growth or development per­
formance, ignoring the possible spatial spillover effect of digital finan­
cial inclusion. This study includes this into the research framework of
this paper. It further confirms that digital financial inclusion not only
contributes to improving the economic vitality of local cities, but also
promotes the development of neighboring cities’ economic vitality.
Third, most related literature has studied the impact of digital
financial inclusion on innovation [26,28] or entrepreneurship [20,23,
71] alone. This paper discusses the relationship between digital inclu­
sive finance and urban economic vitality from the perspective of inno­
vation and entrepreneurship activity. Therefore, this paper places digital
inclusive finance, innovation and entrepreneurship activity, and urban
economic vitality under the same research framework.
Fourth and finally, an interesting conclusion presented herein is that
digital inclusive finance has a leapfrog promoting effect on urban eco­
nomic vitality with the improvement of innovation and
entrepreneurship.
Compared with existing studies, a shortcoming of this paper is that
existing studies mostly discuss the role of digital inclusive finance
through easing financing constraints, reducing information asymmetry
[72], improving credit resource allocation [27], and promoting con­
sumption [73]. These variables are regarded as intermediary variables,
and the intermediary effect model is used to analyze the mechanism of
digital financial inclusion. However, this present study is not subdivided
into this point. From the part of heterogeneity analysis, this paper also
only considers the difference between the core and non-core areas of the
Yangtze River Delta and the impact of digital financial inclusion on
urban economic vitality. It does not discuss the heterogeneity of eco­
nomic effects of digital financial inclusion from the perspectives of city
size, human capital level, and industry type. We leave this more in-depth
research on these aspects for the future.
6. Conclusions and suggestions
6.1. Main conclusion
This research first sorts out the intrinsic relationships among digital
finance, innovation and entrepreneurship activity, and urban economic
vitality from theoretical analysis and then empirically tests the direct
effect, spatial effect, and threshold effect of the impact of digital finance
on urban economic vitality based on panel data of each prefecture-level
city in Yangtze River Delta from 2011 to 2020. The findings are as fol­
lows. (1) Digital inclusive finance helps enhance the economic vitality of
cities, and the depth of its usage has the most obvious positive effect on
urban economic vitality, followed by breadth of its coverage, and lastly
the degree of digitalization. (2) There is regional heterogeneity in the
promotion effect of digital finance on urban economic vitality.
Compared with non-core areas, the total level of digital financial in­
clusion development in core regions has a stronger contribution to urban
economic vitality, and the positive effects of breadth of coverage, depth
of use, and digitalization are all significant. In contrast, the coefficients
of depth of use and digitalization in non-core regions fail to pass the
significance test. (3) There is a significant spatial spillover of the eco­
nomic effect of digital inclusive finance. Innovation and entrepreneur­
ship activity in one region can enhance the vitality of economic
development in neighboring regions. (4) In the threshold regression the
total levels of innovation and entrepreneurship, entrepreneurship ac­
tivity, and innovation activity have a double threshold effect, indicating
Y. Sun and X. You Technology in Society 72 (2023) 102200

that the impact of digital finance on urban economic vitality has non-
linear characteristics with a leapfrog effect as innovation and entre­
preneurship capacity increases. Based on the empirical results of this
study, the following recommendations are proposed.
6.2. Policy recommendations
6.2.1. Give full play to the new advantages of digital technology and
improve the development of digital inclusive finance
The government should improve the construction of its digital in­
clusive financial ecological environment and take up the opportunity of
information infrastructure construction to strengthen the digital finan­
cial system, including mobile Internet and modern financial supervision,
so that all types of financial institutions can enjoy a fully complete
infrastructure. The government can also strengthen the in-depth inte­
gration of new-generation information technologies such as big data and
cloud computing with financial institutions, which can widely apply
digital technologies in all aspects of financial product design, credit
approval, and risk control. The government can further break down
barriers to financial market access, encourage financial institutions to
innovate in digital financial inclusion services, and make digital finance
more adaptable and precise so as to spur corporate R&D, industrial
upgrading, and high-quality development of the real economy through
product and service innovation. Relevant authorities can improve the
internal assessment mechanism of financial institutions to stimulate the
enthusiasm of digital inclusive finance practitioners, further reduce the
constraint mechanism of financial institutions, strengthen the coverage,
usage depth, and digitization degree of digital finance, and promote the
development of digital inclusive services in key areas. Lastly, the gov­
ernment should target to screen the differences in the development
needs of market subjects and promote an inclusive nature so as to benefit
SMEs, people’s livelihood, and social service industries on the basis of
safeguarding profitability. The end result is that digital inclusive finance
will contribute to a healthier economic development.
6.2.2. Strengthen innovation and entrepreneurship and give full play to the
leapfrog effect of the two on urban economic development
Innovation entities should increase R&D investment in the core and
key elements, integrate factor resources, and concentrate on solving
difficult problems. In terms of the top-level design of enterprises, China
should improve the income and distribution mechanism and tailor a
technological innovation incentive mechanism that is suitable for the
long-term development of enterprises. The government should establish
a credit and restraint mechanism for long-term cooperation between
industry, academia, and research, strengthen the confidence and
commitment of all parties to cooperate, encourage the community to
increase R&D expenditures, steadily support basic and applied research,
and create diversified investments. The authorities should strive to
foster and improve the academic innovation ecosystem, actively build a
favorable innovation environment, increase the management of scien­
tific research, give scientific researchers a certain degree of autonomy,
activate a fair form of scientific research appraisal, ensure the quality of
R&D output, and focus on its efficiency. In terms of entrepreneurship,
China should establish and improve national and local entrepreneurship
evaluation systems, regularly investigate or identify the entrepreneurial
trends of entrepreneurial groups, select enterprises with transformation
potential and willingness to transform, and include them in local
entrepreneurship support programs.
According to different types of enterprises, local government de­
partments, university entrepreneurial teams, successful enterprises, and
social organizations can all provide personalized transformation devel­
opment services for entrepreneurs on a regular basis. For example,
successful entrepreneurs and university entrepreneurial teams can be
organized to implement one-on-one coaching for starting a business for
survival entrepreneurs. In addition, the implementation of financial
counterpart support should be strengthened, focusing on the introduc­
tion of a series of featured financial products and services for residents to
start their own businesses. At the same time, financial support for en­
trepreneurs such as entrepreneurial farmers and entrepreneurial college
students should be enhanced, so as to push the transformation of sub­
sistence enterprises into opportunistic enterprises and to improve
entrepreneurial quality.
Funding
This study was supported by Major Projects of Philosophy and Social
Science Research of Jiangsu Educational Committee (No.
2020SJZDA055).
Credit author statement
Yanan Sun: Conceive the topic, Form a paper framework, Concep­
tualization, Supervision, Writing- Reviewing and Editing. Xiaotong You:
Data collection, Methodology, Software, Writing-Original draft prepa­
ration, Supervision.
Data availability
Data will be made available on request.

Appendices
Table A.1
Descriptive statistics of the main variables.

Variable Sample size Average value Standard deviation Minimum value Maximum value

Light 410 2.1716 2.6203 0.0585 17.1054

Dige 410 193.1297 71.9335 27.0800 334.4781
Coverage breadth 410 184.4450 69.3330 14.2900 326.4890
Usage depth 410 200.4111 71.5941 41.4000 349.7485
Digitization level 410 208.5824 91.6542 9.4900 437.9068
Ea 410 90.1153 9.5124 58.0165 100
Ur 410 61.0841 11.9312 31.3000 89.6000
Pd 410 766.1868 634.2111 145.2900 3830
Pge 410 16.6569 6.2821 7.6023 35.6463
Open 410 0.3044 0.3142 0.0178 1.8127

9
Y. Sun and X. You Technology in Society 72 (2023) 102200

Table A.2
Baseline regression results.

Variable (1) (2) (3) (4) (5)

Dige 0.0394∗∗ (0.0164) 0.0342∗∗∗ (0.0096)

Coverage breadth (0.0035)
Usage depth 0.0215∗∗∗ (0.0055)
Digitization level 0.0079∗
0.0042)
Ur − 0.0221 (0.1268) − 0.0172 (0.0103) 0.0021 (0.0086) − 0.0070 (0.0096)
Pd 0.0002∗∗∗ (0.0000) 0.0002∗∗ (0.0001) 0.0001∗∗ (0.000) 0.0003∗∗∗ (0.0000)
Pge 0.0433∗∗∗ (0.0052) 0.0439∗∗∗ (0.0064) 0.0370∗∗∗ (0.0091) 0.0305∗∗∗ (0.0049)
Open − 4.2655∗∗∗ (1.1414) − 4.6775∗∗∗ (1.3386) − 4.5606∗∗∗ (1.2781) − 4.4598∗∗∗ (1.1797)
Constant term − 1.1098 (1.0479) 1.2120∗∗ (0.4670) 2.4804∗∗ (0.7319) 0.7305 (0.7396) 2.5287∗∗∗ (0.7142)
Time fixed effect YES YES YES YES YES
Individual fixed effects YES YES YES YES YES
N 410 410 410 410 410
F 3.51 15766.20 1545.74 40367.65 9386
Within R2 0.5306 0.6378 0.6150 0.6325 0.6267

Notes: ***, **, and * indicate significance at the 1%, 5%, and 10% statistical levels, respectively. Standard errors are in parentheses.

Table A.3
Robustness regression results.

Variable (1) (2) (3) (4) (5) (6) (7)

Dige 0.0087∗∗ 0.0202∗∗∗ 0.0277∗∗∗ 0.0280∗∗

(0.0029) (0.0077) (0.0042) (0.0087)
Coverage breadth 0.0040∗ (0.0020)
Usage depth 0.0048∗∗∗
(0.0019)
Digitization level 0.0019∗ (0.0010)
Ur − 0.0077∗∗ − 0.0075∗ − 0.0018 (0.0014) − 0.0038∗ − 0.0082 (0.0154) − 0.0087∗ (0.0052) − 0.0072 (0.0085)
(0.0031) (0.0038) (0.0020)
Pd 0.0001 (0.0000) 0.00002 (0.0000) 0.0000 1 (0.0000) 0.0000 4 (0.0000) 0.0001 (0.0002) 0.0001 (0.0001) 0.0002∗∗∗
(0.0001)
Pge 0.0048∗∗ 0.0057∗∗∗ 0.0032∗ (0.0016) 0.0016 (0.0020) 0.0327∗∗ (0.0130) 0.0547∗∗∗ 0.0409∗∗∗
(0.0018) (0.0015) (0.0148) (0.0096)
Open − 0.7917∗∗∗ − 0.8866∗∗∗ − 0.8746∗∗∗ − 0.8466∗∗∗ − 3.7000∗∗ (1.5916) − 3.5791∗∗∗ − 3.1823∗∗∗
(0.1643) (0.2046) (0.1877) (0.1540) (0.3699) (0.0879)
Constant term 0.3574∗∗ 0.6569∗∗∗ 0.3014∗∗∗ 0.6967∗∗∗ 12.4747∗∗∗ 11.1216∗∗∗ 0.1542 (0.3424)
(0.1128) (0.1676) (0.0895) (0.1440) (2.5418) (1.0437)
Time fixed effect YES YES YES YES YES YES YES
Individual fixed YES YES YES YES YES YES YES
effects
N 410 410 410 410 410 410 410
Notes: ***, **, and * indicate significance at the 1%, 5%, and 10% statistical levels, respectively. Standard errors are in parentheses.

Table A.4
Endogeneity test on the impact of digital financial inclusion on urban economic vitality.

Variable 2sls GMM

Dige 0.1864∗∗∗ (0.0339) 0.1864∗∗∗ (0.0284)

Ur − 0.0985∗∗∗ (0.0319) − 0.0985∗∗∗ (0.0236)
Pd 0.0005∗ (0.0003) 0.0005∗∗ (0.0002)
Pge 0.0715∗∗∗ (0.0238) 0.0715∗∗∗ (0.0246)
Open − 1.9097∗∗ (0.8772) − 1.9097∗∗ (0.8430)
Constant term 1.0535 (2.5590)
Over-identification test 0.4153 [0.5193].
Weak instrumental variable test 23.2914∗∗∗
Anderson canon. Corr. LM statistic 48.514 [0.0000]
Cragg-Donald Wald F statistic 26.794 (19.93)
Sargan 0.829 [0.3626]
Double fixed effect YES YES
R-sqr 0.8848 0.9900
N 410 410
Notes: ***, **, and * indicate significance at the 1%, 5%, and 10% statistical levels, respectively. The P value of
significance level is in []. The 10% critical value of the Stock-Yogo weak identification test is in parentheses of
the Cragg-Donald Wald F statistic.

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Table A.5
Regional heterogeneity.

Region Core Area Non-Core Area

Dige 0.0399∗∗∗ 0.0060∗∗

(0.0098) (0.0027)
Coverage breadth 0.0185∗∗ 0.0089∗∗∗
(0.0090) (0.0023)
Usage depth 0.0262∗∗∗ − 0.0034
(0.0066) (0.0020)
Digitization level 0.0078 ∗∗
0.0007 (0.0007)
(0.0035)
Ur − 0.0189 − 0.0198 0.0073 (0.0150) − 0.0028 − 0.0091 − 0.0176∗∗ − 0.0021 − 0.0031
(0.0153) (0.0174) (0.0151) (0.0083) (0.0084) (0.0077) (0.0079)
Pd 0.0006∗∗ 0.0008∗∗∗ 0.0007∗∗ 0.0008∗∗∗ 0.0001∗∗∗ 0.0001∗∗∗ 0.0001∗∗ 0.0001∗∗
(0.0003) (0.0003) (0.0003) (0.0003) (0.0000) (0.0000) (0.0000) (0.0000)
Pge 0.1269∗∗∗ 0.1354∗∗∗ 0.1294∗∗∗ 0.1170∗∗∗ − 0.0194∗∗∗ − 0.0154∗∗∗ − 0.0212∗∗∗ − 0.0214∗∗∗
(0.0292) (0.0301) (0.0292) (0.0304) (0.0050) (0.0050) (0.0050) (0.0050)
Open − 3.7971∗∗∗ − 4.0644∗∗∗ − 4.0818∗∗∗ − 3.9753∗∗∗ − 0.7199 − 0.4634 − 0.6408 − 0.7639
(0.5553) (0.5647) (0.5480) (0.548) (0.7145) (0.6909) (0.7251) (0.7266)
Constant term 0.0938 (1.1342) 1.4126 (1.0978) − 0.6523 1.7910∗ 0.8858∗∗ 1.0605∗∗∗ 1.1250∗∗∗ 0.9365∗∗
(1.2261) (1.0715) (0.3662) (0.3539) (0.3912) (0.3729)
Individual fixed YES YES YES YES YES YES YES YES
effects
Time fixed effects YES YES YES YES YES YES YES YES
N 410 410 410 410 410 410 410 410
Notes: ***, **, and * indicate significance at the 1%, 5%, and 10% statistical levels, respectively. Standard errors are in parentheses.

Table A.6
Spatial correlation test of urban economic dynamics.

Year 0-1 adjacency spatial weight matrix Economic distance spatial weight matrix Economic geographic distance spatial weight matrix

W1 W2 W3
2011 0.486∗∗∗ (6.223) 0.381∗∗∗ (5.922) 0.151∗∗∗ (4.683)
2012 0.495∗∗∗ (6.313) 0.397∗∗∗ (6.119) 0.184∗∗∗ (4.530)
2013 0.480∗∗∗ (6.181) 0.391∗∗∗ (6.096) 0.171∗∗∗ (4.275)
2014 0.483∗∗∗ (6.217) 0.391∗∗∗ (6.094) 0.176∗∗∗ (4.387)
2015 0.490∗∗∗ (6.348) 0.379∗∗∗ (5.960) 0.177∗∗∗ (4.437)
2016 0.498∗∗∗ (6.371) 0.391∗∗∗ (6.061) 0.186∗∗∗ (4.580)
2017 0.517∗∗∗ (6.553) 0.400∗∗∗ (6.150) 0.197∗∗∗ (4.805)
2018 0.534∗∗∗ (6.692) 0.407∗∗∗ (6.180) 0.202∗∗∗ (4.876)
2019 0.538∗∗∗ (6.869) 0.371∗∗∗ (5.779) 0.183∗∗∗ (4.521)
2020 0.566∗∗∗ (7.121) 0.376∗∗∗ (5.773) 0.192∗∗∗ (4.680)
Notes: *, **, and *** indicate significance at the 10%, 5%, and 1% levels, respectively. Values in parentheses below the coefficients are Z values.

Table A.7
Applicability tests of the spatial econometric model.

Statistical quantity p

LM test no spatial lag 303.422 0.000

Robust LM test no spatial lag 106.262 0.000
LM test no spatial error 230.413 0.000
Robust LM test no spatial error 33.253 0.000
LR spatial lag 32.25 0.0000
LR spatial error 22.45 0.0004
Wald joint significance test 16.19 0.0063
LR ind nested in both 47.31 0.0000
LR time nested in both 645.62 0.0000

Table A.8
Spatial regression results of the impact of digital financial inclusion on urban economic vitality.

OLS SAR model SEM model SDM

Dige 0.0342∗∗∗ (0 .0067) 0.0266∗∗∗ (0 .0046) 0.0271∗∗∗ (0 .0056) 0.0257∗∗∗ (0 .0059)

Ur -0.0221∗ (0 .0127) -0.0280∗∗∗ (0 .0087) − 0.0288∗∗∗ (0 .0096) − 0.0384∗∗∗ (0 .0099)
Pd 0.0002∗ (0 .0001) 0.0002∗∗ (0 .0001) 0.0002∗∗ (0.0 000) 0.0002∗∗∗ (0.0 000)
Pge 0.0433∗∗∗ (0 .0157) 0.0191∗ (0 .0108) 0.0013 (0 .0149) − 0.0220 (0 .0016)
Open − 4.2655∗∗∗ (0 .4797) − 2.6899∗∗∗ (0 .3448) − 2.8592∗∗∗ (0 .4191) − 2.0328∗∗∗ (0 .4487)
ρ 0.5765∗∗∗ (0 .0398) 0.5318∗∗∗ (0 .0498)
λ 0.6267∗∗∗ (0 .0443)
W × Dige 0.0014 (0 .0109)
(continued on next page)

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Table A.8 (continued )

OLS SAR model SEM model SDM

W × Ur 0.0404 (0.0259)
W × Pd − 9.76e − 06 (0 .0002)
W × Pge 0.0895∗∗∗ (0.0261)
W × Open − 1.9012∗∗ (0.9162)
Log-likelihood − 289.3640 − 300.3870 − 281.1155
Individual fixed effects YES YES YES YES
Time fixed effect YES YES YES YES
Note: ***, **, and * indicate significance at the 1%, 5%, and 10% levels, respectively, with standard errors in parentheses.

Table A.9
Direct, indirect, and total effects of the spatial SDM model.

Direct effect Indirect effects Total effect

Dige 0.0313∗∗∗ (0 .0059) 0.0270∗ (0 .0157) 0.0584∗∗∗ (0 .0177)

Ur − 0.0315∗∗∗ (0 .0016) 0.0358 (0 .0433) 0.0043 (0 .0509)
Pd 0.0003∗∗∗ (0 .0001) 0.0002 (0 .0004) 0.0005 (0 .0004)
Pge 0.0069 (0 .0135) 0.1407∗∗∗ (0 .0362) 0.1476∗∗∗ (0 .0365)
Open − 3.0972∗∗∗ (0 .3818) − 5.2635∗∗∗ (1 .3047) − 8.3606∗∗∗ (1 .4024)
Notes: ***, **, and * indicate significance at the 1%, 5%, and 10% statistical levels, respectively. Standard errors are in
parentheses.

Table A.10
Spatial Durbin model regression results under the spatial weight matrix of economic distance.

Variable Main Wx Direct effect Indirect effect Total effect

Dige 0.0117 (0.0059)

∗∗
0.0233 (0.0164) 0.0162 (0.0069)
∗∗
0.0162 (0.0837)
∗
0.1000∗∗ (0.0498)
Ur − 0.0009 (0.0103) − 0.0408 (0.0345) − 0.0072 (0.0126) − 1.1112 (0.1043) − 1.1184 (0.1127)
Pd 0.0002∗∗ (0.0000) − 0.0005 (0.0005) 0.0002 (0.0001) − 0.0009 (0.0013) − 0.0007 (0.0014)
Pge 0.0131 (0.0131) 0.0876∗∗ (0.0383) 0.0266∗ (0.0144) 0.2619∗∗ (0.1094) 0.2885∗ (0.1170)
Open − 3.0306∗∗∗ (0.4142) − 1.5225 (1.3041) − 3.4889∗∗∗ (0.4203) − 9.0386∗∗∗ (3.5015) − 12.5275∗∗∗ (3.6574)
ρ 0.6379∗∗∗ (0 .0656)
Log-likelihood − 292.8308
Individual fixed effects YES
Time fixed effect YES
Notes: ***, **, and * indicate significance at the 1%, 5%, and 10% statistical levels, respectively. Standard errors are in parentheses.

Table A.11
Test of threshold effects of digital inclusive finance, innovation and entrepreneurship, and economic vitality.

Threshold variable Threshold Type F-value P-value Threshold value Number of BS

10% 5% 1%
Ea Single threshold 125.62 0.0000 24.0255 29.4114 46.2088 300
Double threshold 60.74 0.0467 21.0304 47.7498 178.8424 300
Triple threshold 17.06 0.5933 193.3233 232.6365 339.3356 300
Entrepreneurship Single threshold 39.24 0.0367 29.8774 36.0714 51.6033 300
Double threshold 31.99 0.0800 29.0085 39.5013 51.8827 300
Triple threshold 23.21 0.2833 36.6618 46.7907 100.8107 300
Innovation Single threshold 79.98 0.0033 29.5288 36.7873 56.1150 300
Double threshold 49.06 0.0967 39.1835 102.2063 144.8022 300
Triple threshold 21.06 0.6400 153.1707 176.5639 229.7361 300
Notes: ***, **, and * indicate significance at the 1%, 5%, and 10% statistical levels, respectively. Standard errors are in parentheses.

Table A.12
Estimated results of panel threshold effects.

Variable Ea Entrepreneurship Innovation

Dige (Ea ≤ 98.2300) 0.0050∗∗∗ (0.0007)

Dige (98.2300 < Ea ≤ 99.8200) 0.0085∗∗∗ (0.0008)
Dige (Ea > 99.8200) 0.0176∗∗∗ (0.0011)
Dige (Entrepreneurship) ≤ 95.4589 0.0046∗∗∗ (0.0009)
Dige (95.4589 < Entrepreneurship ≤ 99.6448) 0.0075∗∗∗ (0.0008)
Dige (Entrepreneurship) > 99.6448 0.0165∗∗∗ (0.0018)
Dige (Innovation) ≤ 98.5906 0.0056∗∗∗ (0.0008)
Dige (98.5906 < Innovation) ≤ 99.6025 0.0093∗∗∗ (0.0008)
Dige (Innovation) > 99.6025 0.0172∗∗∗ (0.0012)
Ur 0.0168 (0 .0115) 0.0133 (0.0130) 0.0122 (0 .0121)
Pd 0.0001 (0.0001) 0.0002∗ (0.0001) 0.0001 (0.0001)
(continued on next page)

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Table A.12 (continued )

Variable Ea Entrepreneurship Innovation

Pge − 0.0087 (0.0142) 0.0061 (0.0159) − 0.0134 (0.0150)

Open − 1.9084∗∗∗ (0.4607) − 2.8117∗∗∗ (0.5090) − 1.7678∗∗∗ (0.4944)
Constant term 0.6348 (0 .6452) 0.7843 (0.7285) 0.8272 (0.6778)
Intra-group R-sqr 0.6719 0.5869 0.6367
Notes: ***, **, and * indicate significance at the 1%, 5%, and 10% statistical levels, respectively. Standard errors are in parentheses.

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