Research and development intensity and the performance of Chinese high-and new-technology enterprises

Abstract

Using R&D expenditure data from Chinese listed high-and new-technology enterprises, this paper examines the relationship between R&D intensity and firm performance in both short term and long term. The finding presents that R&D intensity worsens the current firm profitability and only insignificantly contributes to the long-term firm valuation. The result further shows that, during the lag period from one to three years, lagged R&D has an increasingly favorable effect on firm performance as the extension of the lag period. In Chinese high-and new-technology industries, it takes approximately two years for R&D expenditure to explicitly optimize the firm performance. The overall results offer an implication for corporate managers to implement informed R&D time management and maximize the value of R&D investment.