Distance and Innovation: Decoding the Paradox of Geographic Distance in Corporate Group Technological Acquisitions

Abstract In pursuit of innovation, firms increasingly rely on technological acquisitions to access diverse, non-redundant knowledge. However, the effectiveness of such acquisitions, especially those involving geographically distant targets, remains uncertain. Existing research typically treats the acquiring firm as a unitary actor, overlooking the internal geographic structure of corporate groups. Drawing on economic geography and network theory, this study examines how the geographic distance of both headquarters and R&D subsidiaries from the target affects post-acquisition innovation. Based on 346 domestic technological acquisitions by Chinese corporate groups, we find that the headquarters-target distance impedes innovation due to integration challenges, while the subsidiary-target distance promotes it by providing heterogeneous knowledge. Headquarters-target proximity further strengthens the positive effect of subsidiary-target distance, highlighting their complementary roles in the recombination of diverse knowledge. However, geographic dispersion within the corporate group negatively moderates both distance effects by increasing coordination burden and diminishing the marginal returns to knowledge diversity. These findings provide valuable insights into how corporate groups reconfigure their geographic R&D networks by technological acquisitions to leverage geographic distance.