Peer effects on corporate R&D investment policies: A spatial panel model approach

• Published in: Journal of business research 2023-03, Vol.158, p.113667, Article 113667
• Main Authors: Li, Junbao, Shi, Zhanzhong, He, Chengying, Lv, Chengshuang
• Format: Article
• Language: English
• Subjects: R&D peer effects; R&D subsidies; Reflection problem; Spatial panel model
• ISSN: 0148-2963; 1873-7978
• DOI: 10.1016/j.jbusres.2023.113667

•We investigate whether a firm’s R&D expenditure affects its peers’ R&D policies.•We use a spatial panel model with network-structure peer groups for Chinese firms.•Peer firms’ R&D spending determines corporate R&D investment policies.•Competition and information incentives are the two main underlying channels.•R&D subsidies can indirectly increase a firm’s R&D via the endogenous effect. Identifying peer effects has important policy implications because endogenous peer effects can amplify policy effects. Using a spatial panel model with network-structure peer groups and data on listed manufacturing firms in China, we investigate whether a firm’s R&D expenditure affects its peers’ R&D policies. Our results show: (1) peer firms’ R&D expenditures play an essential role in determining corporate R&D investment policies; (2) competition and information incentives are the two main underlying channels; and (3) R&D subsidies can indirectly increase a firm’s R&D via the endogenous effect. Using a novel identification strategy, this study provides additional empirical evidence of peer effects on corporate policies. The findings contribute to our understanding of the impacts of R&D subsidies and indicate that the overall policy effect can be leveraged by considering firms’ networks.