Research,Development And Firm Growth

How firms’R & D investment impacts its growth is a complex and dynamic process. Our hypothesis is that R&D investment has a positive effect on promoting firm growth, but there are many reasons suggesting that this relationship is difficult to detect. Because R & D investment needs long-term financial support substantially, and R & D investment in itself does not automatically bring high growth to firms, it can’t promote firm growth immediately, either. Whether R & D investment promoting the firm growth depends crucially on how the investment is used. In other words, because the firm may not use R & D investment effectively, it is difficult to form a competitive advantage, so the same R & D investment may bring different innovative ability, and produce different growth ultimately. In order to understand the impact of R & D investment on firm growth more accurately, the paper will further analyze the relationship between them from multiple dimensions.The main object of this paper is R & D investment and firm growth, we will analyze how firm characteristics impact on the relationship between them. Based on the sample of manufacturing firms from the board of small and medium-sized listed firms during 2009-2013 period, using the non-equilibrium dynamic panel data, analyze the dynamic relationship between R & D investment and firm growth by GMM. The empirical results are as follows. Firstly, use the model of endogenous firm growth with R & D investment as one of the main mechanisms of growth. Our study evidences a positive effect of R & D investment on the sales growth. But the current R&D investment can not bring high growth to firm immediately, it only increases the opportunity of firm growth. Secondly, analyze the different characteristics that external financing restrictions, innovation persistence and industry respectively on the relationship between R & D investment and firm growth further. Find that financing restrictions will affect the relationship between R & D investment and firm growth as unable to catch growth opportunities. Further more, having persistent patent firms’R&D investment is of greater importance in determining the growth, so firms should make great efforts to improve the efficiency of R&D. The relationship between R&D investment and firm growth varies in the nature of the industry. Compared with the non high-technology firms, high-technology firms’ R & D investment will better promote their growth.According to the research conclusions, R&D investment is the endogenous factor promoting the growth of firm significantly. However, the existence of financing restrictions hinder the promotion effect, firms having persistent innovation achievements and high-tech firms’R&D investment promotes firm growth more significantly. Based on these findings, this paper helps policy makers and business leaders further understand the characteristics of firms’R&D investment and its growth, and gives support to firms for maintaining the R&D activities to promote its growth.