Technological Knowledge Spillover in Business Groups: Evidence from China

Xiaoyun Gong, Shenwei Mo, Xiaofeng Quan and Cheng Xue

Emerging Markets Finance and Trade, 2022, vol. 58, issue 14, 4050-4064

Abstract: We examine the spillover effect of technological knowledge within business groups using a sample of Chinese A-share listed companies from 2007–2019. We find the parent company’s technological knowledge stock improves its subsidiaries’ innovation outputs. The lower communication cost resulting from the opening of a high-speed railway between a parent company and its subsidiaries effectively promotes the transfer of technological knowledge. Heterogeneity tests show that the spillover effects are more significant in business groups where the parent company has lower asset specificity or centralized control. Overall, our evidence suggests that business groups are essential in promoting innovative activities, primarily through technological knowledge spillover.

Date: 2022
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DOI: 10.1080/1540496X.2022.2082867

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