Estimating the Impact of R&D Intensity on Manufacturing Firm Performance: An Instrumental Variable (TSLS) Analysis

( Vol-12,Issue-1,January - February 2026 )

Author(s): Tzai-Chaio Lee

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Page No: 001-008
DOI: 10.22161/ijaems.121.1

Keywords:

IV, R&D, Firm Life Cycle, Manufacturing.

Abstract:

This study investigates the causal impact of R&D intensity (RDI) on Chinese manufacturing firms' performance (ROA) using a panel instrumental variable approach. By leveraging enterprise life cycle stages (ELC) and industry competition intensity (DIC) as exogenous instruments, two-stage least squares (TSLS) estimates reveal a significant positive effect of RDI on ROA (0.41, p < 0.01), contrasting with biased OLS results (-0.001). Growth-stage firms and moderate industry competition amplify RDI's benefits, while debt ratios negatively affect performance. Robustness checks confirm instrument validity (Cragg-Donald F = 48.51 > 19.93) and panel data superiority. Policy implications advocate targeted R&D subsidies for growth-phase firms and innovation alliances in competitive sectors. This work resolves the "R&D paradox" by contextualizing innovation impacts, offering actionable insights for industrial upgrading.

Received: 30 Nov 2025; Received in revised form: 31 Dec 2025; Accepted: 03 Jan 2026; Available online: 08 Jan 2026

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