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R&D expenditure adjustments and firm’s patent-based efficiency: Evidence from China

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  • Zhou, Xue Mei
  • Liu, Bin

Abstract

This study investigates how dynamic adjustments in R&D expenditures affect patent output efficiency among Chinese firms, emphasizing the role of financing constraints. Using difference-in-differences (DID), triple-differences (DDD), and instrumental variable methods, we analyze data from China’s 2015 R&D subsidy policy as a quasi-natural experiment. Results reveal that faster R&D expenditure adjustments correlate with reduced invention patents, highlighting the role of financing constraints in disrupting R&D efficiency. Government subsidies mitigate these constraints, boosting patent output, particularly for firms with historically high adjustment rates. Notably, low-complexity patents (design/utility models) remain unaffected. The study contributes by identifying R&D adjustment speed as a critical efficiency determinant and demonstrating robust methodologies for causal inference. Findings inform policies on R&D resource allocation and subsidy design to optimize innovation under financial constraints.

Suggested Citation

  • Zhou, Xue Mei & Liu, Bin, 2025. "R&D expenditure adjustments and firm’s patent-based efficiency: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 333-350.
    • Handle: RePEc:eee:ecanpo:v:87:y:2025:i:c:p:333-350
    DOI: 10.1016/j.eap.2025.05.041
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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • C59 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Other

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