The Correlation Analysis Between R&D Intensity And Enterprise Performance Of Pharmaceutical Listed Company

The 21st century is an era of economic globalization and diversification, scientific and technological progress and innovation reflect the comprehensive national strength of a country. On one hand, technological elements and innovation ability are the key of core competitiveness for an enterprise. Engaging in R&D activity can improve production efficiency, reduce production cost and obtain relatively high excess profit of the industry through the application of high and new technology and equipment. On the other hand, the uniqueness of innovation can inform product advantage to expand product market share or make it possible to capture new market quickly. If the development of an enterprise still relies on cheap labor and consumption of natural resources as in the past, the increasing capital cost and low production efficiency are bound to maintain an enterprise’s surviving in the fierce market. Hence, R&D innovation becomes the inevitable requirement for enterprises to survive and develop under the knowledgeable economic environment. R&D has big significance not only in macro perspective for a country but also in micro perspective for a company. The relationship and mutual effect between R&D investment and enterprise performance has been a hot topic for a long time. Although in the related research process, a large number of scholars have got many meaningful research achievements. However, carrying out further research based on specific stage of enterprise development is still in a weak phase. A pure study to research the relationship between R&D investment and enterprise performance based on a company’s particular period often get one-side conclusion and it is difficult to form a clear comprehensive understanding. Thus, carrying out our further research on the relationship between R&D intensity and enterprise performance based on enterprise life cycle will not only improve the theory value, but also guide empirical research.As one of new and high technology industries, bio-pharmaceutical industry is closely related to people’s health. It not only embodies reflections of scientific and technological innovation to the rapid economic development, but also a good object to study and research the enterprise production activities based on the perspective of life cycle. In this paper, we select 146 listed pharmaceutical companies as research objects based on the enterprise data disclosed from Shanghai stock exchange and Shenzhen stock exchange. Then we discuss the relationship between R&D intensity and enterprise performance. Therefore, we use comprehensive index method to make reasonable division for all sample enterprises from 2009 to 2014 based on the theory of enterprise life cycle. That is to say, we comprehensively consider the company’s sales growth rate, capital expenditure growth rate and the age of the enterprise, among them, the capital expenditure growth rate is replaced by fixed asset growth rate approximately. In the process of quantitative empirical research, we choose R&D intensity to measure a enterprise’s R&D investment situation. R&D investment includes all expenses with research phase and development phase. The expenses in research phase will be recorded in management expenses in the income statement and the expenses in development phase will be recorded in the item of development spending in the corporate balance sheet. At the same time, we choose relative indexes which can reflect corporate profitability, development ability and enterprise value to measure enterprise performance, which includes operating profit margin, net interest rate of the business, net cash flow growth rate from business operating activities and price-to-sale indexes and so on.From the perspective of enterprise life cycle, we put forward corresponding assumptions about the relationship between R&D investment and enterprise performance. Then we conduct empirical research by analyzing the correlation and multiple linear regression of sample data. The result shows that R&D has a significant impact on enterprise performance in the early-stage. During the growth period, R&D intensity is significantly correlated with corporate profitability as well as corporate value. This correlation also could be observed during maturation period, indicating that enterprises should increase R&D investment to occupy market advantage and maintain product competitiveness in the view of brand effect and corporate image. Simultaneously, there is a negative correlation relationship between R&D intensity and net cash flow growth rate from corporate operating activities. This negative variation suggests that output capacity could not be neglected when judging and weighing R&D investment and cash flows in order to maximize product profit with least R&D investment. This paper has analyzed enterprise hysteresis based on total data without period division when lagging 1-4 stages, respectively. The result reveals that strength of R&D is significantly correlated with operating profit margin, Tobin’s Q, operating margin, price-to-sales and the net interest rate of the business after one to four periods except an individual year. When lagging 5 years, strength of R&D is only significantly correlated with the net interest rate of the business. In general, strength of R&D directly or indirectly affects the enterprise profit level, development level and the enterprise value of bio-pharmaceutical industry. Moreover, the hysteresis effect is most obvious when lagging 1-4 stages. Finally, on the basis of research conclusion of the paper, we put forward reasonable suggestions for the bio-pharmaceutical industry in our country to make them develop more orderly and healthily.