Relationship Between Venture Capital, Financial Innovation, And Operating Performance In Nigerian Fintech Firms

Abstract

Abstract Research Purpose. The research aimed to assess the interrelationships among venture capital funding, financial innovation, and operating performance within Nigerian fintech firms. It sought to investigate both the direct associations between these variables and the potential mediating role of financial innovation on the connection between venture capital funding and operating performance, with a focus on understanding their collective impact on the Nigerian fintech landscape. This is essential because the way business is done could be transformed by encouraging fintech innovations which will increase productivity and efficiency. Design / Methodology / Approach. To accomplish this, the study employed a primary data collection method via a questionnaire distributed to senior management personnel in two hundred FinTech companies. 220 senior management participants were purposively selected, and the gathered data underwent meticulous analysis using Partial Least Squares-Structural Equation Modeling (PLS-SEM) alongside various methodologies, including weighted mean scores, Heterotrait-Monotrait Ratio (HTMT), Fornell-Larcker square’s average variance extracted, Cronbach alpha, composite reliability (CR), and percentage variance. Findings. The findings revealed that the direct influence of venture capital funding on financial innovation yielded non-significant results (R2=0.220, β=0.274, t=1.116, p=0.264). Conversely, the direct impact of financial innovation (FI) on operating performance (OP) exhibited significant results (R2=0.401, β=0.559, t=5.989, p=0.000). Notably, the study discovered that venture capital funding (VC) was statistically insignificant (β=0.274, t=0.3913, p=0.362) in predicting the operating performance of fintech firms in Nigeria. Originality / Value / Practical Implications. The research established that financial innovation plays a pivotal role in augmenting the operating performance of fintech firms in Nigeria. This study addresses a gap in the literature by investigating the impact of venture capital funding and financial innovation on Nigerian fintech firms’ operational performance. It concludes that financial innovation significantly drives operational excellence, while venture capital funding has an insignificant impact, with financial innovation not substantially mediating its influence on performance. The findings underscore the significance of introducing innovative financial products and services, fostering the adoption of a cashless economy, harnessing emerging technologies such as blockchain and Artificial Intelligence, and enhancing financial literacy and awareness. These factors collectively contribute to bolstering the operating performance of fintech enterprises.