Abstract
The paper explores the relationship between R&D expenditures and future performance, and the effects of ultimate ownership on the relationship. Using a sample of 318 Chinese listed firms in 2008 and 2009, our results demonstrate that R&D expenditures exert a positive impact on a firm's future operating performance. SOEs (state-owned enterprises) can generate more future operating performance depriving from R&D expenditures than non-SOEs. In addition, our results also imply that the more voting rights held by the ultimate owner of a firm, the more future operating performance arising from R&D expenditures that firm would produce. Our empirical study contributes to long-standing controversy over the impact of R&D expenditures. And our study has important implications to SOEs who should be involved in R&D activities to sustain long-term competitive advantage.
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