Journal of Business & Financial Affairs

Innovation and R&D Activities in China’s Biotechnology and Pharmaceutical Sectors

Abstract

Tao Zeng

This paper examines innovation and R&D expenditures in China’s biotechnology and pharmaceutical sectors. We found that R&D spending for these industries was much lower than spending in operating activities, which suggests a suboptimal allocation of resources. We also found that the proportion of intangible assets to total assets (including patents, trademarks and licenses) were also much lower than those in industrialized countries such as Canada and the U.S. We also examined other factors that were associated with R&D spending in these sectors. Using the China Stock Market Financial Statement Database and the SINA financial database, it was found that Chinese biotechnology and pharmaceutical firms’ expenditures in R&D activities are positively associated with ownership structure, but negatively associated with firm size, and with investments in other assets including inventory and fixed assets.