Abstract: The development of digital technology has greatly improved the information transparency of group enterprises with fine division of labor and complex structure. The improvement of information transparency may induce opportunistic behavior of group companies towards subsidiaries, but few studies have explored this topic. This paper takes A-share listed business groups from 2007 to 2020 as the research object and analyzes the relationship between group digitalization and innovation of subsidiaries. It is found that group digitization has a significant negative impact on the innovation of subsidiaries. The mechanism test shows that the information transparency brought by group digitization reduces the willingness of subsidiaries to take risks, and then inhibits the innovation of subsidiaries. Further, this paper rules out the mechanisms that group digitization hinders subsidiary innovation through “system coordination problem” and “system standardization”. In the heterogeneity analysis, we find that the negative impact of group digitalization on subsidiary innovation is more significant in the samples under decentralized management and with high geographical dispersion. The conclusions of this paper have significant implications for a comprehensive understanding of the economic consequences of group digitalization and promoting the improvement of the overall innovation ability of enterprises.

Key words: group digitization, subsidiary innovation, hold-up problem