Digital financial capabilities and household entrepreneurship

Abstract

This study investigates the impact of digital financial capabilities on household business ownership and business innovation. Utilising the 2015 China Household Finance Survey (CHFS) data, this paper constructs robust capabilities scores and finds positive associations between digital financial capabilities and household entrepreneurship. After specifying instrumental variables, the results still hold. In addition, we compare the driving forces of the impact through componential dimensions, and discuss the different function channels that digital financial capabilities affect business ownership and business innovation. What’s more, we add the interaction term of digital capability and financial capability, illustrate its role in improving the goodness of fit of the models, and further discuss the interaction effect both generally and at each level of the capabilities scores. Finally, we conduct robustness checks across socioeconomic groups and provide policy implications. This study highlights the different function channels of digital financial capabilities concerning different entrepreneurial activities, as well as the importance of interaction effect in understanding how digital financial capabilities affect household entrepreneurship.