Does Financial Innovation Promote Smart City Development? The Single Threshold of Government Digital Governance Capacity
Year: 2026
Type: preprint
Abstract: Cities worldwide are rapidly undergoing intelligent transformation, yet smart city development faces persistent challenges such as funding gaps, inefficient technology transfer, and regional disparities. Against this backdrop, this study investigates whether and how financial innovation can drive smart city development, with a particular focus on the threshold effect of government digital governance. To address the lack of systematic understanding regarding the nonlinear mechanisms linking finance, governance, and urban intelligence, this paper employs provincial panel data from China spanning from 2010 to 2023. The empirical results show that financial innovation significantly promotes smart city development, and this effect is more pronounced in regions with higher levels of marketization. Government digital governance exhibits a clear threshold effect: once governance capacity surpasses a certain level, the marginal contribution of financial innovation to smart city development is considerably enhanced. Mechanism testing indicates that regional innovation vitality plays a partial mediating role, and this mediating pathway becomes stronger in regions with higher degrees of openness. By extending the understanding of the micro-mechanisms through which financial innovation empowers high-quality urban development, this study provides empirical evidence for differentiated smart city advancement and the optimization of “finance–governance–innovation” synergistic policies.
Source: Research Square
Authors: Wenzhe Yu, Mengwei He
Language: English
Subfield: Urban Studies
Field: Social Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7171985142