A Study on the Impact of R&D Expenses on Financial Performance of Chinese Technology Development-Type SMEs

Abstract

The Central Economic Work Conference in December 2017 stated that the Chinese economy is in an exploratory phase, transitioning from “Made in China” to “Created in China,” from “China Speed” to “China Quality,” and from a manufacturing powerhouse to a manufacturing powerhouse. During this period, technology-innovative enterprises that prioritize R&D investment play a crucial role in innovation and development. This study focuses on the benefits of R&D investment on enterprise development and how R&D activities influence corporate performance and growth. This study is based on the financial statements of technology-based small and medium-sized enterprises (SMEs), using data from Wind Financial Terminal, Guotai Junan Financial Database, and the China Statistical Yearbook, covering seven consecutive years from 2017 to 2023. The study found that the proportion of R&D expenditure has a positive impact on enterprise growth and profitability, but a nonsignificant impact on stability. Controlling for enterprise size, the proportion of R&D expenditure has a positive impact on enterprise growth, profitability, and stability. These findings further shed light on the impact of R&D investment on corporate performance. For high-tech enterprises, the management of R&D investment and utilization should be strengthened.