Showing papers on "R&D intensity published in 2012"
Journal Article•
TL;DR: In this paper, the authors investigated how financial development affects aggregate productivity growth and showed that the level of financial development is good only up to a point, after which it becomes a drag on growth.
Abstract: This paper investigates how financial development affects aggregate productivity growth. Based on a sample of developed and emerging economies, we first show that the level of financial development is good only up to a point, after which it becomes a drag on growth. Second, focusing on advanced economies, we show that a fast-growing financial sector is detrimental to aggregate productivity growth.
624 citations
TL;DR: In this article, the role of R&D alliances as a vital mechanism for creating new technological knowledge is explored, and it is shown that firms with a high level of absorptive capacity seem to benefit more from their alliances.
268 citations
TL;DR: In this article, the authors analyzed the relationship between R&D expenditure and labor productivity across leading geoeconomic players, and found that when R&DI spending of business enterprise sector exceeds R&DB spending of government sector, the labor productivity tends to growth.
169 citations
TL;DR: In this paper, the authors investigated the relationship between initial research and development (R&D) intensity and firm growth using a unique data set for firms with R&D activities in Austria during the period 1995-2006.
Abstract: This paper investigates the relationship between initial research and development (R&D) intensity and firm growth using a unique data set for firms with R&D activities in Austria during the period 1995–2006. Results based on the least absolute deviation (LAD) estimator show that initial R&D intensity has a positive and significant impact on both employment and sales growth in the subsequent 2 years. Quantile regressions for each cross-section reveal that the impact of R&D intensity is significant from 0.3 to the highest quantile of the conditional distribution of employment growth. Furthermore, the elasticity of employment growth with respect to R&D intensity is highest for firms at or slightly below the median of the distribution of firm growth. Finally, we find that the impact of R&D decreases significantly over time.
137 citations
TL;DR: In this article, the authors investigated whether there is a similar relationship between RD and finance restrictions and found that RD restrictions are especially important in financing the growth of high-tech SMEs compared with non-high-technology SMEs.
125 citations
TL;DR: In this article, the authors examined the impact that firms' firm-specific advantages (FSAs) have on performance as and when they receive inward direct investment from foreign countries, and found that both types of FSAs affect diverse MNE performance in a non-linear U-shaped fashion.
56 citations
TL;DR: In this article, the authors examined the relationship between the value of financial analysts' recommendations and the intensity of firms' research and development (R&D) expenditures and found that analysts with more firm-specific experience and greater industry expertise issue more valuable recommendations particularly for R&D-intensive firms.
Abstract: This study examines the relationship between the value of financial analysts’ recommendations and the intensity of firms’ research and development (R&D) expenditures. We conduct univariate, portfolio and regression analyses using a sample of 8,620 public firms for the period 1993-2004. The empirical results reveal that the value of analysts’ recommendations is significantly greater for firms that are more heavily invested in R&D. In addition, we investigate factors that contribute to the value of analysts’ recommendations. We find that analysts with advanced degrees (e.g., Ph.D., M.D.), more firm-specific experience and greater industry expertise issue more valuable recommendations particularly for R&D-intensive firms. Our findings shed light on the important issue of how informed market participants’ activities expedite the price discovery process of R&D firms. Prior research (Lev and Sougiannis 1996) shows that, despite the absence of mandatory financial reporting on R&D, investors incorporate information on the value and productivity of R&D investments into share prices. Our study suggests that analyst recommendations serve as an important channel through which information on the value and productivity of R&D projects becomes impounded into security prices.
40 citations
TL;DR: In this paper, the authors examined the impact of creditor rights on R&D intensity (R&D/total assets) and found that strong creditor rights are associated with reduced R&DI intensity.
Abstract: Manuscript Type: Empirical
Research Question/Issue: This study examines the impact of creditor rights on R&D intensity (R&D/total assets). We argue that managers in countries with strong creditor rights have more incentives to reduce cash flow risk and therefore limit expenditures on R&D more than managers located in countries with weak creditor rights.
Research Findings/Insights: Using a sample of over 21,000 firms from 41 countries, our research is one of the first to document that strong creditor rights are indeed associated with reduced R&D intensity. This negative relationship is observed in market-based countries, but not in bank-based countries. Moreover, the results show that the negative effect of creditor rights on R&D intensity is usually stronger (more negative) for firms facing or near financial distress. We observe that the determinants for R&D intensity consist of both country and firm level variables and firm level variables appear to be more important in explaining the variance of R&D intensity.
Theoretical/Academic Implications: This study documents an important link between creditor rights and R&D intensity. Our empirical procedure specifically accounts for the fact that R&D intensity and debt are likely to be jointly determined.
Practitioner/Policy Implications: This research is important to policy makers interested in understanding the determinants of firms' R&D intensity. In particular, our study suggests a possible harmful effect of strong creditor rights, namely the possibility that R&D intensity will be lowered.
34 citations
TL;DR: This article employed the upper echelons theory and contingency theory in understanding the moderating effect of the chief executive officer characteristics on the relationship between recession and research and development (R&D) intensity.
Abstract: The authors employ the upper echelons theory and contingency theory in understanding the moderating effect of the chief executive officer (CEO) characteristics on the relationship between recession and research and development (R&D) intensity. The authors selected 2004 (nonrecession) and 2008 (recession) years for the analysis. Evidence was found that during recession, indeed, organizations decreased their R&D spending. The findings supported that CEOs with a shorter career horizon decreased R&D spending more dramatically than CEOs with a longer career horizon during recession. No evidence was found for the moderating effects of CEO tenure and insider status.
28 citations
TL;DR: In this paper, the authors examined the impact of internal resources, external networks and export activities on the international innovation performance of Chinese manufacturing firms by drawing on data from a firm-level World Bank survey involving 998 manufacturing firms and adopted a Tobit model to examine the export performance of new products.
Abstract: In an increasingly dynamic global business environment, it is of fundamental theoretical and managerial interests to understand how firms can successfully adapt to changing marketplaces through new product development. The article examines the impact of internal resources, external networks and export activities on the international innovation performance of Chinese manufacturing firms. The effect is tested simultaneously by drawing on data from a firm-level World Bank survey involving 998 manufacturing firms. A Tobit model is adopted to examine the export performance of new products. Findings from the hierarchical regressions demonstrate that local competition contributes to innovation, as do firms’ external networks. Firms involved in exporting can leverage their learning and this can be a key driver for innovation. Although higher R&D intensity may be hampered when local competition is high, returnee managers can stimulate the international innovation performance of firms in highly competitive environments.
21 citations
TL;DR: In this article, the authors adopt the notion of open innovation as external knowledge search and investigate its mutual interdependence with internal organizational structures of a firm's innovation function, and find higher performance gains from open innovation by aligning internal organizational structure in terms of lower specialization as well as higher formalization and decentralization.
Abstract: In the past decade, research on open innovation has brought renewed attention to ways how firms can gain from the interaction with external sources of knowledge and innovation. Complementary internal management practices, however, that explain why some firms benefit from open innovation more than others are still largely unexplored. This study adopts the notion of open innovation as external knowledge search and investigates its mutual interdependence with internal organizational structures of a firm’s innovation function. Drawing upon behavioral theories about organizational search and information processing, we hypothesize how structural dimensions such as specialization, formalization and decentralization affect gains from open innovation. Based on a sample of German manufacturing firms, we find higher performance gains from open innovation by aligning internal organizational structures in terms of lower specialization as well as higher formalization and decentralization. These organizational contingencies of open innovation are further emphasized in light of firms’ internal R&D intensity: (1) Low specialization is especially beneficial for firms that try to align open innovation in a complementary fashion with their high internal R&D intensity. (2) Higher formalization and decentralization is essential for firms that try to substitute their low internal R&D intensity by the means of open innovation.
TL;DR: The authors analyzes the effect that R&D intensity has on corporate reputation, and how this effect can be positively moderated when innovation yields some kind of social benefits, such as social benefits.
Abstract: Purpose: This article analyzes the effect that Research and Development (R&D) intensity has on corporate reputation, and how this effect can be positively moderated when innovation yields some kind of social benefits.
TL;DR: In this article, the authors examined whether the market value reflects the investment in intangible assets predicted by resource-based view (RBV) in a sample of public Japanese firms and industries.
Abstract: In this study, we examined whether the market value reflects the investment in intangible assets predicted by resource-based view (RBV) in a sample of public Japanese firms and industries. In particular, we tested whether the goodness of fit between prevailing industrial setting and firm’s resource endowment is associated with market value. Our findings suggest that while some industries are more valuable than other, intangible assets are not a necessary condition.
The results also indicate that while there exists a strong positive effect of R&D on Tobin’s Q the evidence on the relationship between advertising and Tobin’s Q is mixed. The results also show that firms investing higher levels of intangible assets in low intangible-settings are more valuable.
Posted Content•
TL;DR: In this paper, the authors investigated how financial development affects aggregate productivity growth and showed that the level of financial development is good only up to a point, after which it becomes a drag on growth.
Abstract: This paper investigates how financial development affects aggregate productivity growth. Based on a sample of developed and emerging economies, we first show that the level of financial development is good only up to a point, after which it becomes a drag on growth. Second, focusing on advanced economies, we show that a fast-growing financial sector is detrimental to aggregate productivity growth.
Posted Content•
TL;DR: In this paper, the authors examined the impact of R&D expenditure on market valuation of firm using Tobin's q. The authors found an inverted U-shaped relationship between research intensity and firm value indicating the diminishing marginal return to each rupee spent on research expenditure.
Abstract: The present study examines the impact of R&D expenditure on market valuation of firm using Tobin’s q. The study uses firm level data for Indian manufacturing sector obtained from Prowess database of CMIE for the period 2001-2010. The study forms an unbalanced panel with 326 R&D incurring (reporting) firms and employs Pooled-OLS and fixed effects models to analyze the relationship between R&D investment and firm value. After controlling some firm specific variables the present study finds an inverted U-shaped relationship between R&D intensity and firm value indicating the diminishing marginal return to each rupee spent on R&D. This finding is consistent with the findings of Huang and Liu (2005) for Taiwan and Bracker and Krishnan (2011) for US. It indicates that, R&D investment have a positive impact on the market value of firm at the beginning, but, when the investment exceeds an optimal level, these investments lower the firm value.
TL;DR: In this article, the effects of Foreign Direct Investment (FDI) on technical progress in Spanish manufacturing are analyzed and the results show that most FDI goes to capital-intensive sectors, especially when those sectors are also Research and Development (R&D)-intensive.
Abstract: This article analyses the effects of Foreign Direct Investment (FDI) on technical progress in Spanish manufacturing. Particularly, we study how FDI's contributions vary depending on the economic structure of the industry. The results show that most FDI goes to capital-intensive sectors, especially when those sectors are also Research and Development (R&D)-intensive. Our estimates of the Solow residual show that the positive effect of contemporaneous and lagged FDI on manufacturing productivity is only attributable to capital and R&D intensive industries in what seems to be related to a dynamic capabilities explanation or to complementarities with R&D expenditures.
TL;DR: In this article, the authors examined the association between corporate leverage and their investment in R&D and developed certain testable propositions, which were tested using a dataset of manufacturing firms in India covering the period 1995-2010.
Abstract: The paper examines the association between corporate leverage and their investment in R&D. Towards this end, it develops certain testable propositions. These propositions are tested using a dataset of manufacturing firms in India covering the period 1995–2010. Three main results are gleaned from the analysis. First, the optimal leverage ratio typically declines with R&D intensity. Second, the financial crisis has exerted a negative effect on leverage for firms. And finally, the dampening effect of R&D intensity on leverage is the highest for foreign private firms.
Posted Content•
TL;DR: In this article, the authors used industrial R&D Scoreboard data from leading world innovators, and found that compared to the US, the EU has fewer young firms among its leading innovators.
Abstract: Europe’s innovation gap relative to the US is often attributed to its industrial structure in which new firms do not play a significant role, especially in high-tech sectors. This view of a structural EU innovation deficit is popular in European innovation policy discussions, but has received little or no thorough empirical investigation. This paper aims to address this ‘evidence gap’. Using industrial R&D Scoreboard data from leading world innovators, we find that compared to the US, the EU has fewer young firms among its leading innovators. Using a decomposition analysis, we show that having fewer young firms accounts for about one third of the EU-US differential in R&D intensity, while fifty five percent of the differential is due to the fact that young leading innovators in the EU are less R&D intensive than their US counterparts. Further analysis shows that this is almost entirely due to a different sectoral composition. We thus confirm that the EU-US private R&D gap is indeed mostly a structural issue.
Posted Content•
01 Jan 2012
TL;DR: In this article, the authors examined the association between corporate leverage and their investment in R&D and developed certain testable propositions, which were tested using a dataset of manufacturing firms in India covering the period 1995-2005.
Abstract: The paper examines the association between corporate leverage and their investment in R&D. Towards this end, it develops certain testable propositions. These propositions are tested using a dataset of manufacturing firms in India covering the period 1995-2005. The estimates support the fact that firms which make high efforts on R&D investments exhibit lower leverage ratios. Additionally, the estimates reveal that the dampening effect of R&D-intensity on leverage is the highest for foreign private firms. For state-owned firms however, R&D activity appears to be positively associated with leverage.
01 May 2012
TL;DR: In this paper, the authors identify the major determinants of performance of the R&D alliances, with an aim toward raising the success rate in cooperative relationships, and assesses whether the success factors of purchasing relationship identified in the literature apply equally to SMEs in Korea.
Abstract: The purpose of this study is to identify the major determinants of performance of the R&D alliances, with an aim toward raising the success rate in cooperative relationships. In particular, this study assesses whether the success factors of purchasing relationship identified in the literature apply equally to SMEs in Korea. The results of this study indicate that inter-firm cooperation, experienced cooperation, and efficiency of government support have positive impacts on the purchase rate of new products. On the other hand, R&D intensity and resources of competencies of the firm do not influence it. Additionally, market attractiveness does not moderate the effects of the five independent variables on the purchase. The extracted determinants according to the results of surveys give valuable and practical hints to the SMEs when they make a decision on their R&D alliances with large enterprises.
Posted Content•
TL;DR: In this paper, the authors present the evolution of the R&D intensity gap between the EU and its major competitors using data from the Industrial Scoreboard covering the period 2002-2010.
Abstract: In this paper we look at the evolution of the R&D intensity gap between the EU and its major competitors using data from the Industrial Scoreboard covering the period 2002-2010. We focus on R&D intensity as it is normally recognized as an important determinant of the competitiveness of economic regions and we assess whether the gaps relative to major competitors arise from differences in industrial composition (structural component) or differences within sectors (intrinsic component). This is important from a policy perspective since the task of modifying the industrial structure is a much harder one. The paper is divided in two parts. In the first part of the paper we first present the evolution of the R&D intensity gap between the EU and its major competitors (US, Japan, BRIC, Asian Tigers) and then we look more closely at the role and evolution of the structural and intrinsic component for each pair-wise comparison, by looking at four basic macro-sectors defined in term of their R&D intensity. In the second part of our work we concentrate on the EU-US R&D intensity gap and, by applying firm level analysis, we test whether the results obtained by the statistical decomposition of aggregate R&D intensity are confirmed. The evidence provided by this exercise is especially important because it allows us to perform a comparison where the ceteris paribus condition is more likely to be satisfied. In particular we test whether there is evidence of across-sector variability in R&D intensity and whether, within sectors, EU and US firms are performing differently. To do this we have to control for various factors such as size, cyclical effects, common macroeconomic shocks and company’s age. Age is important for at least two reasons. First, young companies might have more problems in finding access to funds necessary in order to invest in R&D. Second, young companies might have to be especially aggressive in terms of innovation if they want to enter and succeed in markets where incumbents already exist. More generally, company age is important because it takes time to build, test and eventually change a given business model and there is plenty of evidence that young firms are those exhibiting the highest dynamism. Therefore, our aim here is also to document the age profile for R&D intensity and to verify whether the R&D intensity gap between EU and non-EU companies is related to age of the firm. Finally we check if R&D intensity is affected by the abundance of internal funds (as captured by the profit/sales ratio), if this relationship changes with the age of the company and if the latter shows across-regional variation. Our results indicate that there is evidence of strong across-sector variation and some evidence of within-sectors-acrossregion variation, which –however- is not always in favour of the US. This allows us to conclude that firm level analysis confirms the results from the aggregate analysis. Moreover we find that R&D intensity tends to decrease as firm size increases (as measured by the number of employees), that the age profile for R&D intensity behaves very differently in the two regions and that young companies in the EU exhibit a much higher reactivity to lagged profits-to-sales ratio, when compared to their US counterpart. We believe that this is an indication that the conditions for accessibility and cost of funds differ significantly across the two regions.
TL;DR: In this article, the impact of mergers and acquisitions (M&A) activities in research-based pharmaceutical companies on drug approval in pharmaceutical industries following M&A activities was analyzed.
Abstract: This paper analyzes the impact of mergers and acquisitions (M&A) activities in research-based pharmaceutical companies, specifically the impact of R&D expenditure, sales revenue, and R&D intensity on firms’ productivity, on drug approval in pharmaceutical industries following M&A activities. The model was estimated using annual data, gathered from eight large research-based pharmaceutical companies in the world post-M&A, during the period 2003 until 2010. The regression analysis method uses a pooled regression method with generalized least square (GLS) analysis. The result further shows that following M&A activities, firms’ one-year lagged sales revenue (t-1) and R&D intensity to be positive in increasing significantly the firms’ amount of total approval of drugs in research-based pharmaceutical industries, while, surprisingly firms’ one-year lagged R&D expenditure (t-1) have a negative impact in increasing significantly the firms’ amount of total approval of drugs in research-based pharmaceutical industries.
Journal Article•
TL;DR: Wang et al. as discussed by the authors analyzed the distribution of RD investment and influences of RD intensity and found that bigger and older firms are more likely to be involved in RD activity and take a larger amount of RD activity, but a lower RD intensity.
Abstract: Using 300 thousand industrial enterprises' panel data from 2005 to 2007 in China,this paper analyzed the distribution of RD investment and influences of RD intensity.The descriptive statistics brought the following conclusions.Only 10% of enterprises take RD investment and 45.25% of firms' RD activity isn't stable.For Large enterprises whose annual revenue of sales is more than 30 million yuan,RD intensity measured by the ration of RD investment to gross sales is only 0.52%.Industrial distribution of firms' RD investment reflects the features of heavy-industrialization in China.RD investment varies from provinces.RD investment taken by state-owned enterprises(SOEs) makes up 45.6% of the total RD investment.Bigger and older Firms are more likely to be involved in RD activity and take a larger amount of RD investment,but a lower RD intensity.The concentration of RD investment is very high.About a quarter of RD investment is taken by 3% of firms,general firms have not taken RD investment initiatively.By the analysis of RD investment's influences,we got the following conclusions.First,firm's size and age are positive correlated with the amount of RD investment,but negative with RD intensity.RD intensity measured by the ration of RD investment to total asset shows a reverse-U relationship with firm's scale.RD intensity is positively influenced by profit for privately-owned enterprises and foreign-owned enterprises.But this influence is not significant for SOEs.Second,bank loans and fiscal support to science technology greatly improved RD intensity.However,the effect on SOEs is higher than privately-owned enterprises.China's innovation investment is trapped in a dilemma.On one hand,SOEs lack intrinsic motivations to take RD investment and its high RD intensity mainly benefits from financial support.On the other hand,privately-owned firms have incentives to take RD investment,but lack financial support.
Posted Content•
01 Jan 2012
TL;DR: In this article, the authors present the evolution of the R&D intensity gap between the EU and its major competitors using data from the Industrial Scoreboard covering the period 2002-2010 and assess whether the gaps relative to major competitors arise from differences in industrial composition or differences within sectors (intrinsic component).
Abstract: In this paper we look at the evolution of the R&D intensity gap between the EU and its major competitors using data from the Industrial Scoreboard covering the period 2002-2010. We focus on R&D intensity and we assess whether the gaps relative to major competitors arise from differences in industrial composition (structural component) or differences within sectors (intrinsic component). The paper is divided in two parts. In the first part of the paper we first present the evolution of the R&D intensity gap between the EU and its major competitors (US, Japan, BRIC, Asian Tigers) and then we look more closely at the role and evolution of the structural and intrinsic component for each pair-wise comparison, by looking at four basic macro-sectors defined in term of their R&D intensity. In the second part of our work we concentrate on the EU-US R&D intensity gap and, by applying firm level analysis, we test whether the results obtained by the statistical decomposition of aggregate R&D intensity are confirmed. In particular we test whether there is evidence of across-sector variability in R&D intensity and whether, within sectors, EU and US firms are performing differently, controlling for size, cyclical effects, common macroeconomic shocks and company’s age. Age is important for at least two reasons. First, young companies might have more problems in finding access to funds necessary in order to invest in R&D. Second, young companies might have to be especially aggressive in terms of innovation if they want to enter and succeed in markets where incumbents already exist. Therefore, our aim here is also to document the age profile for R&D intensity and to verify whether the R&D intensity gap between EU and non-EU companies is related to age of the firm. Finally we check if R&D intensity is affected by the abundance of internal funds (as captured by the profit/sales ratio), if this relationship changes with the age of the company and if the latter shows across-regional variation. Our results from firm level analysis indicate that there is evidence of strong across-sector variation and some evidence of within-sectors-across-region variation, which –however- is not always in favour of the US. Moreover we find that R&D intensity tends to decrease as firm size increases (as measured by the number of employees), that the age profile for R&D intensity behaves very differently in the two regions and that young companies in the EU exhibit a much higher reactivity to lagged profits-to-sales ratio, when compared to their US counterpart. We believe that this is an indication that the conditions for accessibility and cost of funds differ significantly across the two regions. Keywords: R&D Intensity, EU R&D gap JEL Codes: L16, O30, O57
Posted Content•
TL;DR: In this paper, the authors present a critical review of trends and prospects in China's research and development (R&D) and highlight the potential challenges which Chinese policy makers have to face in the future.
Abstract: This paper presents a critical review of trends and prospects in China’s research and development (R&D). Specifically it discusses the main achievements and the role of major players in China’s R&D sector. It also highlights the potential challenges which Chinese policy makers have to face in the future.
01 Jan 2012
01 Jan 2012
TL;DR: In this article, the authors explored the determinants of R&D intensities in selected Indian firms that spend on research and development (R&D) activities and found that outward orientation, profitability, imports of capital goods, advertisement, and business house affiliation played a negative role in the research intensity of Indian firms.
Abstract: A B ST R A C T The decision to spend on Research and Development (R&D) is very crucial for the growth of any firm. This study explores the determinants of R&D intensities in selected Indian firms that spend on R&D activities. The impact of business house affiliation on R&D activities is also taken as a crucial factor determining R&D activities. The study found that R&D behavior for the period 2003-2009 is different from the year 2010. The year 2010 being the recovery year there has been significant rise in R&D spending among the selected firms. As there are some interrelated variables in the model, the simultaneity in the models is verified with Hausman tests and then two-stage least square method is applied for the empirical estimation and analysis. Outward orientation, profitability, imports of capital goods, advertisement etc. turned out to be important determinants of R&D intensity. Business group affiliation as such has a negative role in R&D intensity except for top-50 business houses in certain year.
Posted Content•
TL;DR: In this article, the authors investigated the role of Chinese firms in innovation in large and medium-sized enterprises and found that China's R&D spending has expanded substantially over the past few decades.
Abstract: To cope with the rising labour cost and protect the country’s deteriorating environmental conditions, Chinese policy makers have recently made a series of policy changes to promote innovation and hence the development of a knowledge-based economy in the country in the coming decades As a result, China’s R&D spending has expanded substantially This paper contributes to the understanding of R&D behaviour in China’s large and medium-sized firms and hence the role of Chinese firms in innovation The latter has important implications not only for the transformation of the Chinese economy but also for the rest of the world as Chinese firms become increasingly active internationally
TL;DR: In this article, the relationship between labour and drivers of technological innovation was analyzed across European countries, also considering the interaction of these variables with the structural indicator of the public debt, and the main findings are: the fruitful effect of total public expenditure on education as a percentage of GDP and R&D intensity on employment rate, whereas an increase of general government consolidated gross debt has a negative effect for employment rate as well as for technology proxies.
Abstract: The study here analyzes, across European countries, the relationship between labour and drivers of technological innovation, also considering the interaction of these variables with the structural indicator of the public debt. The main findings are: the fruitful effect of total public expenditure on education as a percentage of GDP and R&D intensity on employment rate, whereas an increase of general government consolidated gross debt has a negative effect for employment rate as well as for technology proxies. Empirical evidence provides some elements to discuss main economic policy implications from relationships between observed facts.
11 Jun 2012
TL;DR: This article examined whether firms' R&D investment leads to performance and found that the empirical relation between firms' research investment and performance varies with the phase: prior research investments have a positive effect on current performance and current research investment has a negative effect on performance.
Abstract: We examine whether firms' R&D investment leads to performance. Unlike the previous studies, we employ both individual indicator and comprehensive indicator measures of firm performance for Chinese manufacturing firms. Our results show that the empirical relation between firm's R&D and performance varies with the phase: prior R&D investments have a positive effect on current performance, and current R&D investment has a negative effect on current performance. We also find that relation between R&D and performance is shown to be much stronger when the performance is measured by comprehensive performance than when the performance is measured by ROE and EPS.