Do Chinese business groups have better innovation performance?

Whether business groups in emerging markets are paragons or parasites is a hot topic. We focus on whether latecomer firms in China can promote their innovation performance through setting up business groups. Combining institutional theory with innovation search theory, we propose that the focused firm affiliated to a business group (i.e. administrative firm, core firm, close to core firm, and peripheral firm) has lower innovation performance. Moreover, absorptive capacity and Research & Development (R&D) alliance intensity moderate these effects. Two studies in China support our arguments.