Digital finance and the firms’ production stages along the global value chain

The rapid rise of digital finance has become indispensable for firms seeking to move up the global value chain (GVC). This paper investigates whether and how the development of city-level digital finance influences firms’ span of production stages along the GVC. The results show that digital finance significantly expands firms’ production span, and the finding remains robust to multiple tests. Further mechanism analysis disclosures that digital finance realizes its positive impact by increasing firm’s import upstreamness, alleviating external financial constraints and enhancing both innovation input and output, which ultimately enable firms to occupy more stages in global production. Heterogeneity tests indicate that the effects vary systematically across firms of different sizes and ownership types. These findings contribute to enriching the research on the digital economy and its impact on firm production, as well as offer practical insights for policymakers to overview a beneficial interaction between city digital finance development and firm’s production and trade status.