Does your R&D concern me?

Given the high uncertainty associated with investing in research and development (R&D), understanding the drivers for making these investment decisions is crucial. This paper utilizes data from Chinese A-share listed companies from 2013 to 2021 and employs a system GMM estimation method to investigate the influence of peer companies on corporate R&D spendings. The results show that these expenditures are significantly and positively impacted by peer companies’ R&D spending. A further dynamic panel threshold regression reveals that the peer effect on firms’ R&D spending weakens as market power and market concentration increase, and that the peer effect is stronger for non-state-owned enterprises than for state-owned ones. This study uncovers the strategic imitation underlying corporate R&D behaviour, not only expanding the research perspective on innovative decision-making but also providing empirical evidence for policymakers in designing more effective innovation incentive policies and for managers in understanding competitive behaviour.