Peer effects of firms’ R&D investments in China: distribution and relative position of firms

Purpose This study aims to investigate the peer effects of firms’ R&D investments by focusing on their distribution and relative position. The specific objectives are threefold: First, it extends the literature on peer effects by incorporating the distribution of peer firms’ R&D investments. Second, it enriches existing research by revealing how these peer effects vary across different stages of focal firm’s life cycle. Third, it explores the directional nature of peer effects resulting from both the average level and the dispersion of R&D investments among peers. Design/methodology/approach This paper uses a two-way fixed effects model to analyse the peer effects of R&D investment. On this basis, the robustness test is carried out by replacing variables, changing the sample period and replacing the model. And endogeneity is processed through the method of system generalized method of moments. Heterogeneity is analysed by grouping. In addition, dividing leaders and followers further analyses the research questions. Findings Both the average value and distribution of peers’ R&D investments (RDI) enhance focal firms’ RDI. The peer effects are greater for non-state-owned firms and growth and maturity firms. The follower firms are more inclined to be influenced by their peers. Leading firms’ RDI behaviour is the main source of peer effects. Originality/value First, it extends peer effects by considering peer distribution and finds that the discrete degree of peer firms’ R&D investment significantly affects focal firms’ behaviour. Second, it enriches the literature by uncovering the heterogeneity of peer effects according to focal firms’ life cycles. Third, it examines the directionality of the peer effects of R&D investment induced by the average value and discrete behaviour of peers.