R&D Intensity and firm performance: Evidence from Chinese manufacturing firms

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.