ABSTRACT
The explosion of research and development (R&D) expenditures in China brings a puzzling fact that the proportion of research in R&D is extremely small, and thus the proportion of development is large. This article distinguishes research from development in R&D and investigates the heterogeneous effects of the two components on the performance of Chinese listed firms. Using a generalized propensity score matching approach with continuous treatments, we present non-linear relationships between R&D composition and firm performance. While development-oriented firms benefit more from an increase in profit than a growth in productivity, orientation toward research contributes more to productivity gains than to profitability. Research and development activities are found to be complementary in promoting firm performance. The results suggest the existence of optimal proportions of the components of R&D for maximizing firm performance.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes on contributors
Xiaoyong Dai is an associate professor at the School of Economics and Finance, Xi’an Jiaotong University, China. His research lies in the area of development economics with a particular focus on innovation and productivity. Email: [email protected]
Yuanyuan Guo is an assistant professor at the School of Finance, Shandong Technology and Business University, China. Her research fields are economics of innovation, public policy and applied micro-econometrics.
Le Wang is an assistant professor at School of Economics and Finance, Xi’an Jiaotong University, China. His researches focus on technological search and firm innovation.