Small and medium-sized enterprises have become the main force of innovation in China, but whether the diversified financial structures（formal and informal credit）promote enterprises’ multiple innovation activities is ambiguous. Based on the 2018 Survey Data of Enterprise Innovation and Entrepreneurship in Guangdong Province, this paper splits the credit sources of small industrial and commercial enterprises into three types: formal loan, informal loan, and credit between supply chains, to test which financial service will promote enterprises’ innovation activities, including technological and non-technological innovations. It finds that: （1）Enterprises who can get（more）loans from the formal sector are more likely to choose technological innovation; those who can get loans from the informal sector are more likely to choose non-technological innovation, i.e., innovating the business model or coping with environmental regulations, etc.（2）Enterprises who can get credit from supply chains may benefit the most types of innovation, but the formal and informal loan will promote multiple innovations.（3）To sum up, the formal financial sector plays a more important role on enterprises’ technological innovation activities than the other two informal sources.
Further study shows that different financial services affect enterprises’ innovation through different channels. One channel is that formal loan will increase the investment in research and development（R&D）, and then promote technological innovation. The other is to smooth the cash flow mechanism. Informal credit, especially the supply chain credit, may ease the liquidity constraint of enterprises, and then stimulate the innovation behavior indirectly. The results are robust after using instrumental variables（IV-Probit）and considering the heterogeneous bias of enterprises and entrepreneurs.
This conclusion may indicate that financial services can benefit small business innovation in China, but formal credit and informal credit have complementary advantages. We hope that this finding can inspire financial policy decisions, and contribute to the small business innovation literature.