How does fintech promote urban innovation? empirical evidence from China

To explore the role of fintech in stimulating urban innovation and to bridge the realization path of urban innovation from the supply side of new finance, we search Baidu webpages through the keywords "city + year + fintech," use the total number of search result pages to measure the city-year fintech level, and utilize panel data of 278 prefectural cities from 2004 to 2021 to explore the effect and mechanisms of fintech on urban innovation with two-way fixed effects and instrumental variables models. We find that fintech is beneficial in promoting urban innovation, but this impact is regionally heterogeneous. The promotion effect is more significant in the east and middle regions, non-coastal riverine regions, and fifth-tier cities. Further mechanism analysis shows that fintech mainly promotes urban innovation by improving traditional financial development and attracting foreign direct investment. This study provides a policy basis for enhancing urban innovation and promoting regional fintech development.