DIGITAL FINANCE, HUMAN CAPITAL, AND URBAN INNOVATION IN INDONESIA

Objective: The objective of this study is to investigate digital finance and urban innovation in 98 cities in Indonesia. This study uses panel data with a time period from 2000 to 2021. Theoretical Framework: This research is based on theories that discuss digital finance to understand the development of digital financial technology, and human capital theory to explain actors who utilize digital technology and also innovation theory to explain the innovation of actors in digital technology, especially those who live in urban areas with a high level of digital dependence Method: This study uses heterogeneity analysis with a panel data structure. This study also use two-step system generalized method of moments estimation model. Results and Discussion: This research finds that digital finance has a significant impact on urban innovation. However, the heterogeneous impact of digital finance on urban innovation for each city in Indonesia has a different level of commercial attractiveness. Research Implications: In Indonesia, traditional finance also plays an important role in urban innovation where the supply of traditional finance plays a role in moderating the effect of digital finance promotion on urban innovation. Human capital is a vital factor driving innovation. Originality/Value: This research builds on previous research regarding the impact of digital finance on innovation where most of the research related to digital finance and innovation focuses on enterprise technology innovation, while this research focuses on urban innovation as an originality this study.