Diversification and R&D Intensity: An Empirical Analysis of Chinese Listed Companies

Abstract

This study seeks to explore the relationship between product diversification and R&D investment in diversified firms. We analyzed the diversification efforts of 189 Chinese listed companies from 11 industries to test explanations, using M-form adoption and technological opportunity as proxies for organizational controls and potential scope economies. Our analysis finds greater degrees of diversification and technological opportunity had an increasingly negative effect on relative R&D intensity. These findings suggest that R&D investment decisions in Chinese listed diversified firms may be driven by R&D efficiencies, and not by short-term risk preferences.