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Does Optimal R&D Intensity Level Exist in Chinese Defense Enterprises?

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Listed:
  • Chi-Wei Su
  • Kai-Hua Wang
  • Ran Tao
  • Oana-Ramona Lobonţ
  • Nicoleta-Claudia Moldovan

Abstract

This paper investigates whether there exists an optimal level of research and development (R&D) intensity, at which defense enterprises are able to maximize their market performance. The Panel Threshold Regression Model was applied to probe the link between R&D intensity and sales growth for defense listed enterprises, in China. The empirical results indicate that the Law of Gibrat does not hold and, unlimited input in R&D, does not guarantee positive paybacks. This may lead to the assumption that there is an optimal R&D intensity level in Chinese defense enterprises. Due to the fact that the defense industry has broken entrance barriers and considering the introduction of social capital into R&D activities, managers and top management should set more specific guidelines and provisional benchmarks to ensure effective R&D resource allocation in order to achieve maximum performance.

Suggested Citation

  • Chi-Wei Su & Kai-Hua Wang & Ran Tao & Oana-Ramona Lobonţ & Nicoleta-Claudia Moldovan, 2021. "Does Optimal R&D Intensity Level Exist in Chinese Defense Enterprises?," Defence and Peace Economics, Taylor & Francis Journals, vol. 32(1), pages 107-124, January.
    • Handle: RePEc:taf:defpea:v:32:y:2021:i:1:p:107-124
    DOI: 10.1080/10242694.2019.1597464
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