Quantile heterogeneous impact of R&D on firm growth in Chinese manufacture: how ownership, firm size and sectors matter?

ABSTRACT

This paper explores the heterogeneous impact of R&D on firm growth in Chinese manufacturing industry during the periods 2012–2017. We divide the full sample into sub-samples according to different ownership, firm size and sectors, respectively, which help comprehensive observe the impact of R&D on firm growth. The results indicate that R&D has a significant positive impact on firm growth, and that R&D of private enterprises has a greater impact on firm growth than that of state-owned enterprises across all quantiles. Moreover, we find the R&D effectiveness of non-small and medium-sized enterprises is significantly greater than that of SMEs. Additionally, persuasive evidence proves the existence of an inverted-U relationship between R&D and firm growth, except for higher-growth state-owned SMEs. The results also indicate that R&D plays a more significantly positive role in high-tech industries. Our finding suggests that policymakers should encourage R&D investment in manufacturing industry to promote firm growth. But policymaker must classify firms, observe R&D intensity turning points of firms with different types, formulate meticulous R&D strategies, and maximize R&D utility.

KEYWORDS:

• R&D
• firm growth
• manufacture
• heterogeneity
• dynamic quantile regression

Acknowledgments

Our deepest gratitude goes to the Professor, David Peel, and the three referees for their helpful comments and constructive suggestions which helped improve the quality of this paper greatly. This research is partly supported by the National Natural Science Foundation of China under Grant Nos.71671062.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ http://news.cntv.cn/2014/08/04/ARTI1407133211115355.shtml. Under the ‘new normal’ situation of China’s economy, the economic growth rate has changed from 10% to 6%-8%. The tertiary industry has gradually become the main body of industry, consumption contributes more to economic growth than investment, and its demand has become the main body of demand. In these structural changes, advanced productivity has been continuously generated and expanded, and China’s economy will change from factor-driven and investment-driven to innovation-driven.

² Also, R&D expenditure from 86 billion dollars in 2011 to 177 billion dollars in 2017..

³ http://www.gov.cn/xinwen/2018-11/01/content_5336616.htm. By the end of 2017, the private economy had contributed more than 50% of the tax revenue, more than 60% of the GDP, more than 70% of the technological innovation achievements, more than 80% of the urban labour employment, and more than 90% of the enterprises.

⁴ Detailed information is also available at http://www.gov.cn/zwgk/2011-07/04/content_1898747.htm.

⁵ See www.oecd.org/sti/ind/48350231.pdf.

⁶ λ is the turning parameter that reduces the individual effects to zero to improve parameter estimation performance. When λ=0, the penalty term no longer exists; if λ tends to be infinite, the model without individual effects is obtained. In this study, λ is set to 1. To test the robustness of our results, we also use λ=0 for robustness analysis in line with Zhu et al. (2020).

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [71671062].