Intra-group spillovers of digital innovation: Evidence from Chinese business groups' knowledge networks

This study provides a systematic examination of horizontal knowledge spillovers in digital technology innovation among subsidiaries within Chinese enterprise groups, offering novel insights into the diffusion mechanisms of digital advancement in complex organizational networks. Leveraging the International Patent Classification (IPC) system, we identify 2.7 million digital invention patents that precisely match the technical characteristics of digital innovation at the IPC subgroup level, constructing robust indicators to measure digital innovation activities. Through meticulous manual collection, we compile a comprehensive database covering over 400 parent-subsidiary pairs of Chinese A-share listed enterprise groups from 2007 to 2020. Utilizing a robust econometric framework incorporating firm and year fixed effects, we establish causal evidence that peer subsidiaries' digital technology innovation generates statistically significant productivity spillovers, increasing other group members' total factor productivity (TFP). Our analysis further reveals important boundary conditions: these spillover effects are substantially amplified when business groups possess stronger market power, or when subsidiaries share closer business correlations and technological similarities. Through comprehensive mechanism analysis, we identify two primary transmission channels: formal intra-group knowledge spillovers and intensified related-party transactions. These findings contribute to the literature on innovation economics by quantifying network externalities in digital technology, while offering practical guidance for corporate governance and industrial policy formulation in emerging markets.