Determinants of Firm R&D Investment: Evidence From China

The Chinese firm´s R&D investment is lower than that in other countries. In this paper we analyzed determinants of firm R&D investment from resource-based view. We generalized seven kinds of firm internal resources that may influence firm R&D´s investment decision-making on the basis of literature review. We collected the financial data of 1136 individual firms from the China Private Science and Technology Firms Database. We extracted three factors that cumulative explained about 73% variance by using principal component analysis of factor analyses. Three factors are physical resource factor, R&D manpower resource factor, and financial resource factor. We investigated the empirical relationship between the three factors and firm R&D investment by using a regression model. The results show that both physical resource and R&D manpower resource are statistically significant in explaining firm´s R&D investment. The financial resource factor is statistically insignificant in explaining firm´s R&D investment. This suggests financial constraints may not be a critical determinant of the firm´s R&D investment in data. Based on these results, we gave some policy implications and potential fields of further study