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Managerial perception on competition and strategic R&D decisions1

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  • Cheng, Jie
  • Huang, Dan
  • Wu, Yanling

Abstract

The literature contends that managerial perception shapes firms' strategic decisions. Using a sample of high-tech firms in China, we examine the impact of managerial perception on competition (MPC), a learned response stemming from past market environment and measured by the textual analysis technique, on firms' strategic R&D decisions (R&D investments and R&D activities disclosure). We find that managers who perceived fierce competition from past market environment have strong incentive to enhance/sustain firms' competitive strength. Such incentive drives managers to calm on the surface (i.e., withholding R&D activities information) but strive underneath (i.e., making more R&D investments). Current product market competition, firms' market share leadership and CEO educational level moderate the effects of MPC on strategic R&D decisions due to their influence on managers' incentive or ability to compete. Finally, we find that firms with a high MPC obtain higher market valuations through engaging in strategic R&D decisions.

Suggested Citation

  • Cheng, Jie & Huang, Dan & Wu, Yanling, 2023. "Managerial perception on competition and strategic R&D decisions1," Economic Modelling, Elsevier, vol. 123(C).
    • Handle: RePEc:eee:ecmode:v:123:y:2023:i:c:s0264999323000937
    DOI: 10.1016/j.econmod.2023.106281
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    2. Liu, Jia & Wang, Bin & Kong, Linghui & Gu, Xiaolong, 2023. "Does a Chairperson's military experience promote share repurchase? Evidence from Chinese listed companies," Economic Modelling, Elsevier, vol. 126(C).

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