Innovation in Business Groups: Evidence from China

This paper examines the innovation in companies within business groups. Compared with stand-alone companies, companies within business groups invest more in innovation activities. Further analysis shows that companies within business groups are supported by stronger cash flow from their parent companies and under competition pressure from peer firms within business groups. The effect is more pronounced in the firms in the high-tech industry and competitive regions. The results are consistent with various endogenous and robustness tests.