Ownership structure and R&D spending: evidence from China's listed firms

Abstract

Purpose This paper seeks to examine the effect of ownership concentration, inside ownership and state ownership on the R&D spending practices for China's listed firms. The paper argues that corporate ownership structures including ownership concentration, inside ownership and state ownership are important for corporate expenditures on R&D in China, whose firms present a high ownership concentration and a high level of state ownership. Design/methodology/approach The paper takes the form of an empirical study using a sample of 780 listed Chinese firms for six years from 2000 to 2005. Findings It is found that firms with concentrated share ownership have lower R&D spending, and firms with inside ownership have lower R&D spending. However, firms with a higher level of state ownership spend more on R&D. Research limitations/implications Given that corporate ownership structure and tax policy have changed dramatically in China in recent years, future studies should be conducted to explore the association between firms' R&D investment activities and those ownership structure and tax policy changes. Social implications This study is of interest to the policy makers, corporate management, and academics who wish to examine corporate R&D and innovation activities and those factors, including ownership structure, which are associated with R&D investment decisions. Originality/value This is the first study that examines the relationship between ownership and R&D spending for Chinese listed firms.

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