Peer effects with multifaceted network dependence structures in R&D investment decisions: Evidence from Chinese listed firms

The literature has demonstrated that firms in the same network exhibit significant peer effects, but barely from the perspective of multiple networks. Using a novel spatial econometric model with convex combinations of multiple weight matrices, we investigate the peer effects with multifaceted network dependence structures in Chinese listed firms' R&D investment decisions, and the underlying mechanism as well as the economic consequences. Our main conclusions include: (1) A firm's R&D investment is mostly affected by its industry peer firms, followed by those with similar technical and financial characteristics, and geographical peer firms are negligible. (2) The intensity of peer effects is significantly affected by the degree of information incompleteness and market competition. (3) A firm's R&D investment can benefit its performance in the short run, while peer firms' R&D investments would inhibit its performance after a period of time. The research can provide practical guidance for market participants and regulators.