Internationalisation of R&D activities: A boon or bane?

Abstract

We address this important research gap by comparing the impact of R&D investments and international R&D presence on both short and long term firm performance with particular attention on the firms’ export performance, while controlling for a wide range of variables, including firm size, industry type, level of patenting activity etc. We argue that R&D investment would have a stronger positive effect on the long-term (vs. short-term) firm performance and no significant effect on export performance. We also hypothesize that international R&D presence would have a significant stronger positive effect on export performance than on short and longterm firm performance. Using 1,540 firm-year observations from a balanced panel of 385 privately-owned firms in a patent-intensive industry, listed on the Shanghai and Shenzhen stock exchanges, we find support for all our hypotheses. Specifically, R&D investment has a negative effect on short-term performance (profitability), a positive effect on long-term performance (firm value) and no significant effect on export performance. In contrast, international R&D presence has a significantly stronger positive effect on export performance than on short-term and longterm firm performance. We discuss the conceptual contribution and managerial implications of our findings along with their limitations and some useful directions for future research.