FinTech, heterogeneous innovation, and firm total factor productivity

FinTech, as a technology-driven financial innovation, is an important engine for deepening supply-side structural reform in finance and enhancing the capacity of financial services for the real economy. Against the backdrop of advancing innovation-driven development, this study uses micro data on listed firms from 2000 to 2023 to examine how FinTech improves firm total factor productivity (TFP) from the perspective of heterogeneous innovation behaviors. The results show that FinTech significantly increases firm TFP. This conclusion remains robust after addressing endogeneity concerns and conducting multiple robustness tests. The mechanism analysis indicates that FinTech promotes firm heterogeneous innovation (incremental and breakthrough innovation), in turn enhancing TFP. Breakthrough innovation contributes more to TFP at the margin. The heterogeneity analysis further reveals that the impact of FinTech on TFP is stronger for manufacturing and large-scale firms, as well as for firms with low bargaining power in supply chains or higher levels of digital transformation. These findings underscore the role of FinTech in easing information frictions and reallocating knowledge and financial resources toward innovation with higher productivity payoffs, thereby linking financial digitalization to firm-level knowledge creation and diffusion.