Empirical Determinants of Research and Development (R&D) Investment in Chinese Manufacturing Companies

Abstract

Background and Aim: As manufacturing enters the fourth industrial revolution, R&D investments help in converting new ideas into innovative products and services. Manufacturing firms rely on R&D projects to improve product quality, increase productivity, reduce waste, and enhance operational efficiency. This study examined the empirical determinants of Research and Development (R&D) investment in Chinese manufacturing companies. Materials and Methods: Data was obtained from the Oriana database, which keeps updated records regarding R&D investments across Southeast Asia. The database provides information about key R&D drivers and resources that companies are willing to invest as percentages of their revenues. A systematic analysis of data was used to identify the key determinants and their impact on R&D decisions and intensity. The FE model equations were used for calculating correlational relationships among variables. Results: The study found that key determinants associated with R&D decisions and intensity include firm size, market power, demand-pull, technology opportunity, and appropriability. Technology opportunity and demand-pull had the strongest influence on R&D decisions and intensity. Firm size also showed a significant influence on research intensity and development decisions. However, market power showed limited impact on both R&D decisions and intensity. Conclusion: Technology opportunity and demand-pull are the key determinants of Research and Development (R&D) investment in Chinese manufacturing companies.