Research On The Impact Diversification Made On R&D Investment

Recently，China is in a period of economic restructuring. Since the1990s, withthe stimulation of vast domestic market and the securities market, numerousenterprises, in order to seize the market opportunities, have experienced a boom ofdiversified business. Diversified development has gradually become the focus oftheorists. On the other hand, with the advanced development of science andtechnology, R&D capability, the lifeblood of business, is increasingly becoming thecore competitiveness and an important source of value creation. Therefore, companiespay much attention on R&D activities. Then, What impact would diversification madeon R&D? It is a problem that directly affects companies’ ability to keep innovative.The purpose of this paper is to answer this question, analyze the transmissionmechanism of diversification influencing R&D investment and explore the impactwhich is different types of diversification made on R&D investment.First of all, we reviewed the relevant domestic and foreign literature, describedthe main research contents and significance and put forward research ideas; Secondly,we individually analyzed the theory of diversification and R&D, and use Wrigleyclassification to define the enterprise in four categories: single, dominant, related andunrelated. In the theoretical study of the relationship between diversification andR&D, learning from foreign research, we classified internal control into financialcontrol and strategic control, and explained two internal controls choosing preferencefor four different enterprises. The two internal control mechanisms for companies’performance had different evaluation criteria, which led to managements’ differentwishes in R&D activities and then impacted R&D investment; finally, on the basis ofthe previous analysis, we put forward four hypotheses and used empirical analysis toprove the reasonableness of the hypotheses.The results showed that:(1) Comparing with the single operating companies,diversification restrained the companies’ R&D investment;(2) On the condition ofdistinguishing the diversified correlation，comparing with the related diversification,unrelated diversification has a significant inhibitory effect on the compan ies’technological innovation activities;(3) Companies with the higher leveldiversification exposed to lower R&D intensity. This research provided Chineseenterprises with a new perspective of examining different internal controls implementation path of diversified companies. Meanwhile, this article provided areference to all enterprises, especially high-tech companies, to choose the type ofdiversification.