Abstract: Chinese listed companies mostly adopt a parent-subsidiary group structure in their operations. Financial Shared Service Center (FSSC), as an innovative practice of financial digital transformation and centralized resource management within business groups, is gradually extending from accounting sharing to diversified sharing. However, whether and how it affects groups innovation remains unclear. Based on the data of A-share listed business groups and their subsidiaries from 2009 to 2022, this paper finds that FSSC enhances innovation of business groups, especially subsidiaries, which supports the “facilitation hypothesis” rather than the “inhibition hypothesis”. The mechanism test reveals that FSSC enhances groups innovation by facilitating risk management, capital control and information control. The greater the external financial, operational, and regulatory pressure faced by business groups, as well as the higher the complexity of organizational and business control, the stronger the facilitating effect of FSSC on groups innovation. Additionally, the innovation facilitation role of FSSC can further enhance business groups’ technological superiority, product competitiveness, and investment value. This paper enriches the research on FSSC and groups resource allocation and control model, responds to the debate on the impact of centralized control on enterprise innovation. It is of great significance for the construction of world-class financial management system and high-quality development of business groups.

Key words: business groups innovation, Financial Shared Service Center (FSSC), resource allocation, group control, parent-subsidiary structure