Abstract
R&D (research and development) activities have historically played a major role in strengthening companies’ growth and competitiveness. A study of the R&D activities of firms in China, as well as the determinants of these activities, is important, because transforming the country’s industrial structure is required for the economic development of labor-intensive industries that depend on low-wage labor.
This study uses the panel Tobit model to analyze firm-level panel data on manufacturing firms above a certain size in China, gathered between 2004 and 2007. Using this model, this study analyzed the factors that affect these firms’R&D investment. The main results are as follows. First, in terms of financial factors, middle-small and non-public (i.e., private, etc.) firms face financial constraints. Second, export activities have a positive effect on R&D investment in local firms, especially private firms, but have no effect on foreign firms and HMT (Hong Kong, Macao Taiwan) firms. Third, an increase in profit and number of years of operation are also important
factors. Finally, it is revealed that foreign and HMT firms invest less in R&D, while larger firms invest more in R&D in China.
