R&D expenditures, ultimate ownership and future performance: Evidence from China

This study examines the relationship between R&D expenditures and future performance, as well as the moderating effects of ultimate ownership on the relationship. Using a sample of 772 Chinese listed firms from 2007 to 2012, this study shows that R&D expenditures are positively related to firms' future performance and that the R&D expenditures of SOEs lead to better future performance than those of non-SOEs. In addition, the results also reveal that voting rights of ultimate owners positively moderate the R&D-performance relationship. We also adopt fuzzy-set Qualitative Comparative Analysis (fsQCA) to reveal the interdependent and interrelated nature of the explanatory predictors of future performance. The results of fsQCA further indicate that large-sized SOEs with concentrated ownership could attain higher future performance on R&D investments if there are more patent applications and capital and operating spending. These findings complement the R&D performance literature by simultaneously considering the combinatory effect of ultimate ownership and control ability.