R&D spending,strategic position and firm performance |
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Authors: | Bing Guo Jing Wang Steven X Wei |
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Institution: | 1. School of Accounting and Finance, Hong Kong Polytechnic University, Hong Kong, China2. School of Accounting and Finance, Hong Kong Polytechnic University, Hong Kong, China3. School of Accounting and Finance, Hong Kong Polytechnic University, Hong Kong, China |
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Abstract: | Based on R&D investment data from Chinese listed manufacturing firms, this paper examines the effect of R&D spending on firms’ future performance conditional on their strategic positions. We find that firms pursing a product differentiation strategy have more R&D spending than those with a cost leadership strategy. In addition, we document a positive effect of R&D spending on firms’ future performance if they adopt a product differentiation strategy. Meanwhile, for the firms that adopt a cost leadership strategy, the relationship between R&D spending and firm performance resembles an inversed U-shape. Furthermore, we find this inversed U-shape relationship only exists for non-state-owned firms. Overall, this paper provides guidance and useful suggestions on the efficient allocation of R&D resources for Chinese manufacturing firms. |
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Keywords: | R&D spending Strategic position Firm performance |
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