The impact of financial technology on the digital dynamic capabilities of SMEs: evidence from China

Using the financial technology (fintech) index based on the Baidu Search Index from 2011 to 2024, we investigate the impact of fintech on the digital dynamic capabilities of small and medium-sized enterprises (SMEs) in China. The baseline result shows that fintech significantly enhances SMEs’ digital dynamic capabilities. We provide further evidence that mitigated financing constraints, increased number of senior management appointments with IT backgrounds, and increased frequency of digital mergers and acquisitions are the underlying mechanisms. Furthermore, the cross-sectional tests show that fintech is more strongly associated with digital dynamic capabilities of SMEs in regions with higher digital infrastructure, among firms with less organizational slack and lower managerial myopia. The findings highlight the enabling role of fintech in strengthening SMEs’ digital capability building and provide useful implications for promoting high-quality digital development in emerging markets.