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

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.

Automated summary

Using a spatial panel model with network-structure peer groups and data on listed manufacturing firms in China, this study investigates the impact of a firm's R&D expenditure on its peers' R&D policies. The findings show that peer firms' R&D expenditures play a crucial role in determining corporate R&D investment policies, with competition and information incentives being the key channels. Additionally, the study reveals that R&D subsidies can indirectly increase a firm's R&D via the endogenous effect. This research provides empirical evidence of peer effects on corporate policies and highlights the importance of considering firms' networks in policy design.