How Digital Technology Shapes the Spatial Evolution of Global Value Chains in Financial Services

Abstract

Rapid advances in digital technologies are reshaping value creation and the trade landscape of global financial services, yet the channels through which they influence the spatial evolution of financial services global value chains (GVCs) remain insufficiently identified. Using a global panel of 52 countries over 2013–2021, we estimate a dynamic Spatial Durbin Model (SDM) to identify overall effects and quantify spatial spillovers and temporal dynamics. We then combine Geographically and Temporally Weighted Regression (GTWR) with spatial mediation models to examine heterogeneity and underlying mechanisms. Our findings show that digital technology significantly drives the spatial evolution of financial services GVCs. Its influence is dominated by spatial diffusion, exhibiting a dynamic pattern of a strong short-run boost followed by long-run reallocation. This dynamic effect is not homogeneous; rather, it reflects a pronounced dual-driver structure: the momentum is more robust when human capital and R&D output reinforce each other, whereas increases in innovation level alone are unlikely to translate into sustained impetus for spatial restructuring. Crucially, digital technologies reshape GVC geography through three core channels: attenuating distance decay, strengthening spatial proximity, and amplifying spatial heterogeneity. These forces deepen the domestic diffusion of knowledge, capital, and technology and extend their spillovers to neighboring and connected economies. The results provide robust empirical evidence on financial geography in the digital era and have clear implications for policies that facilitate cross-border financial services and strengthen regional coordination in support of the 2030 Agenda for Sustainable Development, particularly SDG 8 (financial inclusion) and SDG 10 (global financial governance).