R&D Expenditure as a Response to Peer Influence

51 Pages Posted: 2 Jul 2019 Last revised: 27 Dec 2019

See all articles by Dien Giau Bui

Dien Giau Bui

National Taiwan University, Department of Finance, Students

Yehning Chen

National Taiwan University

Chih-Yung Lin

National Chiao-Tung University

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics

Date Written: July 1, 2019

Abstract

We identify the endogenous social effects proposed by Manski (1993) in firm R&D spending. By using state-level Uniform Trade Secrets Act (UTSA) enactments as exogenous shocks, we find that focal firms respond positively to peers’ R&D expenditure. The results suggest that managerial learning and relative-wealth concerns are dominating economic mechanisms. This peer effect on R&D spending is more prominent for firms with tighter financial constraints, in higher competitive industries, and having more innovative peers.

Keywords: Peer effect; R&D; trade secret legal protection; managerial learning; relative wealth concerns

JEL Classification: G31, G32, G34, G41

Suggested Citation

Bui, Dien Giau and Chen, Yehning and Lin, Chih-Yung and Lin, Tse-Chun, R&D Expenditure as a Response to Peer Influence (July 1, 2019). Available at SSRN: https://ssrn.com/abstract=3412770 or http://dx.doi.org/10.2139/ssrn.3412770

Dien Giau Bui

National Taiwan University, Department of Finance, Students ( email )

1, Sec. 4, Roosevelt Road
Taipei
Taiwan

Yehning Chen

National Taiwan University ( email )

1 Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

Chih-Yung Lin

National Chiao-Tung University ( email )

Taiwan

Tse-Chun Lin (Contact Author)

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

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