The roles of competition on innovation efficiency and firm performance: Evidence from the Chinese manufacturing industry

Firms, especially Chinese manufacturing firms, invest significant resources in innovation activities to sustain their position in the intensifying competitive environment. However, innovation efficiency has led to grow-ing concerns due to the rapid increase in R&D expenditures. The purpose of this study is to explore the com-plicated role of competition on innovation efficiency and firm performance with a sample of 12,020 Chinese manufacturing firms for the period 2005-2007. The results show that most Chinese manufacturing firms are inefficient in R&D activities. Competition forces firms to focus on the improvement of innovation efficiency, but at the same time, it also undermines collaboration and leads to unpredictable R&D results. Therefore, there is an inverted U-shaped relationship between these variables. Competition also negatively moderates the positive impact of innovation efficiency on firm performance. The findings help firms formulate appropri-ate innovation strategies for sustainable innovation performance.(c) 2022 The Author. Published by Elsevier Espana, S.L.U. on behalf of AEDEM. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)

Automated summary

This study examines the impact of competition on innovation efficiency and firm performance in Chinese manufacturing firms. The results reveal that competition drives firms to improve innovation efficiency but also undermines collaboration and leads to unpredictable R&D outcomes. Additionally, competition negatively moderates the positive impact of innovation efficiency on firm performance.