Characteristics of Corporate R&D Investment in Emerging Markets: Evidence from Manufacturing Industry in China and South Korea

The issue concerning the increasing research and development (R&D) investment in emerging markets is especially attractive for many researchers and practitioners. This paper measures and compares the characteristics of Chinese and South Korean R&D expenditures of manufacturing companies from 2012 to 2016. It also examines the impact of R&D investment on firm performance. The results show that debt maturity and cash reserves are positive determinants of R&D investment in China and South Korea. Firm size, internal financing, and debt ratio are restrictive factors of R&D intensity in Chinese manufacturing companies, while debt ratio is the only negative determinant of R&D investment in their South Korean counterparts. The results also show that R&D intensity exhibits a strong positive impact on the performance of manufacturing companies in both countries. Moreover, this impact is stronger in South Korea than in China. In addition, R&D investment has a positive time-lag effect only on the performance of Chinese manufacturing companies. Our study presents some new evidence for the relationship between R&D intensity and firm performance in emerging markets.