Does business group affiliation make firm innovation different? Evidence from Taiwan

This paper investigates how business group affiliation affects firm innovation. Business groups have greater access than most stand-alone firms to the resources needed to trigger innovation in emerging economies. Business group affiliation provides firms with key necessary resources and facilitates affiliated firms to engage in higher-level innovative activities. However, unaffiliated firms tend to undertake relatively low order innovative projects because of their resource constraints. Such patterns of innovative activities vary from a firm´s group membership. Evidence from Taiwan presented in this paper suggests that affiliated firms generate greater innovative outputs than unaffiliated firms. The findings also suggest that affiliated firms generate higher proportion of major innovation while unaffiliated firms produce more on incremental innovation. This study contributes to recent endeavours to understand the effects of business group on firm innovation.