R & D spending among Chinese SMEs: the role of business owners’ characteristics

Abstract

Purpose– Given that organizational decisions are made by individuals and thus shaped by their subjective and objective characteristics, the purpose of this paper is to examine the effect of SME business owners’ characteristics on their firms’ research and development (R & D) spending in a transition economy.Design/methodology/approach– The authors first build the arguments that, among small- and medium-sized enterprises (SMEs), business owners’ perceived importance of R & D-related activities, their education, related experiences, and social connections, should affect their firms’ R & D spending positively. Then the authors use a Chinese nationwide survey of private SMEs to test the arguments. Tobit regression analyses are conducted by taking Stata 12.0 as the statistic tool.Findings– The authors find that business owners’ perceived importance of R & D-related activities is positively associated with their firms’ R & D spending. In addition, better-educated owners and owners who have technology-related working experience tend to invest more in R & D activities. Finally, owners who have social connections, especially industrial connections, tend to spend more on R & D activities.Originality/value– This study improves the understanding of R & D spending determinants among SMEs. Going beyond general environmental determinants, it reveals the important agency role of SME owners, and thus contributes to a better understanding of how decisions leading to SME innovations are influenced by business owners’ perceptions and demographic characteristics.