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ID: 161769

Is R&D cash flow sensitive? evidence from Chinese industrial firms / Weng, Qian

Weng, Qian	Journal Article
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Summary/Abstract

We hypothesize that research and development (R&D) is sensitive to cash flow fluctuations due to asymmetric information and agency problems in the credit market. We adopt a variant of the Q model for R&D investment using the value of the firm, physical capital and employment to capture firm fundamentals as proxies for investment opportunities. We add cash flow to this specification, and estimate the augmented model separately for R&D participation and spending decisions using data on Chinese industrial firms for the period 2001–2006. We find that R&D participation and spending are sensitive to cash flow fluctuations, conditional on firm fundamentals. We also find that the cash flow sensitivity of R&D varies across firms depending on ownership.

Key Words

R&D ; Cash Flow ; Financing Constraints

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ID: 116506

Multi-product firms, product mix changes and upgrading: evidence from China's state-owned forest areas / Soderbom, Mans; Weng, Qian

Soderbom, Mans	Journal Article
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2012.

Summary/Abstract

Product selection matters for a firm's productivity and long-run growth. Recent theoretical and empirical studies indicate that an important margin of adjustment to policy reforms is the reallocation of output within firms through changes in product mix decisions. This paper examines the frequency, pervasiveness and determinants of product-switching and upgrading activities in firms located in China's state-owned forest areas during a period of gradual institutional and managerial reforms (2004-2008). We find that changes to the product mix are pervasive and characterized by adding or churning products rather than only shedding products. Moreover, changes in firms' product mix have made a significant contribution to the aggregate output growth during our sample period. We also find that firms with different characteristics, human capital and market conditions differ in their propensity to diversify and upgrade product mix.

Key Words

Firm Characteristics ; Multi - Product Firms ; Product Mix Changes ; Product Upgrading ; China's State - Owned Forest Areas

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