Radical Innovation or Incremental Innovation: Digital Finance and Enterprise Innovation Choice

Digital finance has not only changed the traditional financial service system, but also has an important impact on the innovation activities of micro enterprises. Taking Shanghai and Shenzhen A-share listed companies from 2012 to 2021 as a sample, this paper studies the impact of digital finance on corporate innovation choices, investigate the mediating role of product demand and financing cost based on demand side and supply side. The results show that digital finance can effectively promote both incremental and radical innovation. Moreover, compared with radical innovation, the development of digital finance promotes a higher degree of incremental innovation of enterprises. Further research finds that digital finance mainly promotes incremental innovation and radical innovation of enterprises by increasing product demand and reducing financing costs. Moreover, the promotion effect of digital finance on incremental innovation is stronger in enterprises with strong organizational inertia, and the promotion effect of digital finance on radical innovation is stronger in enterprises in growth and recession. The economic consequences show that incremental innovation is more conducive to improving the short-term performance of enterprises, while radical innovation is more conducive to improving the long-term performance of enterprises.