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How to make R&D effective? Distance-to-frontier in manufacturing and R&D returns

Author

Listed:
  • Wang, Yiru
  • Xie, Yanxiang
  • Liu, Yang

Abstract

This paper constructs an R&D return indicator (research quotient) and examines the impact of the distance-to-frontier in manufacturing on firms’ R&D returns. We document that reducing the distance-to-frontier enhances R&D return, exhibiting an increasing marginal effect. Structural analysis shows that both industry technological frontiers and cross-national technological frontiers improve R&D returns, with the impact of cross-national technological frontiers being more significant. Reducing the distance-to-frontier enhances firms’ R&D returns through investment-financing and supply-demand coordination mechanisms. Industry heterogeneity indicates that technology-intensive industries exhibit greater sensitivity to technological frontierization. Our paper provides new evidence on the factors trapping Chinese manufacturing firms in the “R&D return puzzle.”

Suggested Citation

  • Wang, Yiru & Xie, Yanxiang & Liu, Yang, 2025. "How to make R&D effective? Distance-to-frontier in manufacturing and R&D returns," Finance Research Letters, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:finlet:v:81:y:2025:i:c:s1544612325007536
    DOI: 10.1016/j.frl.2025.107494
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    References listed on IDEAS

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