We examine how pyramidal group structure and top executives’ concurrent engagements within group affect innovation of listed firms in China. Our results show that listed firms in lower levels of group pyramid are less innovative, measured in terms of R&D expense and patent applications. Further analysis shows that the negative impact is unrelated the ultimate shareholders’ incentives to tunnel resources from bottom-level firms. Besides, a firm becomes less innovative when its CEO or board chair concurrently takes an upstream position, i.e. a position in an upper-level firm in group, while it becomes more innovative when its CEO or board chair concurrently takes a downstream position, i.e. a position in a subsidiary or an affiliated company. Those upstream positions, nevertheless, enhance corporate innovation when they are located at low levels of pyramid. Our results indicate that in China, corporate pyramids deter innovation of low-level firms in group, but the problem is partially resolved by having CEO or board chair engaging in upper-level firms.