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R&D Returns, Spillovers and Firm Incentives: Evidence from China

Author

Listed:
  • Chorching Goh

    (World Bank, Washington DC 20433, USA)

  • Lixin Colin Xu

    (World Bank, Washington DC 20433, USA)

  • Wei Li

    (Cheung Kong Graduate School of Business, Beijing 100738, China)

Abstract

Using a new data set of 12,000 firms in China, this paper estimates the returns to R&D investment and its spillover effects, and investigates how the returns to R&D depend on firm incentives. For the firms in the sample, the results show that on average firm output increases around 0.4 yuan for each additional 1 yuan spent on R&D in the previous year, and there is high R&D return regardless of whether the endogeneity of R&D intensity is dealt with or not. Interestingly, the marginal return to R&D is significantly higher in firms whose CEOs were not appointed by the government, and lower when CEO pay is directly related to annual performance. The return to R&D is higher in relatively poor regions and for firms with worse access to finance. There are also non-trivial R&D spillover effects.

Suggested Citation

  • Chorching Goh & Lixin Colin Xu & Wei Li, 2016. "R&D Returns, Spillovers and Firm Incentives: Evidence from China," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 11(4), pages 581-607, December.
    • Handle: RePEc:fec:journl:v:11:y:2016:i:4:p:581-607
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-005-016-0030-9
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    Keywords

    R&D; returns; incentives; spillover;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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