Research on the Relationship Among Differentiation Strategy, Research and Development Investment and Enterprise Performance-Based on Chinese Pharmaceutical Listed Firms

Abstract

In recent years, China has witnessed the science and technology evolution globally, steady and sustained economic growth, as well as an increasing trend of R&D investment. Confronted with the COVID-19 epidemic, various kinds of vaccines have been developed in the first place in China, and this is due to the research and development investment at all levels every year, including nation, local governments, and enterprises. Given the situation that many countries in the world lack the ability or slow of the researching of vaccine, the analysis and study of R&D investment in pharmaceutical industry and its economic effect can provide more references for the development of enterprises at the micro level and also be significant for the formulation of national strategies at the macro level. Innovation can significantly influence and promote the development. The 19th CPC National Congress Report in 2016 proposed a “three-step” strategy to further accelerate the construction of innovation-oriented country through scientific and technological innovation. There is no doubt that research and development input has become a core element in the development of innovation. Especially in the context of environmental uncertainty, some new ideas have also been proposed for developing the pharmaceutical industry. The academic circles have concentrated more on how the R&D input influences the corporation performance and vice versa. However, due to different understandings, the results obtained in the process of analyzing and researching different samples and sample intervals are quite different. First, most studies show that the level of research and development can produce an optimistic impact on the firm enterprise. Second, when referring to the correlation between research and development input and the corporation performance, there may exist lag, non-linear, or even negative effects. Therefore, based on relevant theories of economics and management, the introduction of mediating variables and moderating variables to study the correlation can provide new theoretical explanations and empirical evidence when studying the impact of R&D input in the pharmaceutical companies on enterprise performance, which has theoretical and practical significance. In the light of the annual financial data of the listed companies in Shanghai and Shenzhen A-share pharmaceutical companies from 2016 to 2020, an empirical research was conducted in this paper on the relationship among differentiation strategy, research and development input and company performance from the perspective of environmental uncertainty. The empirical results show that the differentiation strategy largely and positively influenced the performance of the corporation. Through implementing differentiation strategy, there existed a positive relationship between the research and developing input and the performance of the corporation. The environmental uncertainty plays a significant moderating role on research and development expenditure and firm performance. The results provided a theoretical basis for Chinese pharmaceutical enterprises to improve the decision-making mode of enterprise performance under dynamic environment. The main research work and research contents of this paper could be illustrated in the following aspects: First, according to the research topic and content, the correlation between differentiation, enterprise performance, and differentiation strategy and the relation between R&D input and corporate performance under environmental uncertainty were reviewed, which provided a basis for this study and clarifies the research direction. Second, this paper defined the concepts and theories, involving Schumpeter innovation in technological innovation theory, neoclassical economic growth theory, neo-Schumpeterism and endogenous economic growth theory, which provided theoretical basis for the research and also had positive influence on making analysis of the relationship between research and development input of corporations. Besides, it expounded Porter's competitive strategy theory, resource-based theory, industrial analysis theory and dynamic capability theory in strategic management, and provided a theoretical basis for the research and analyzing the relation among differentiation strategy, R&D input and corporation performance with the consideration of environmental uncertainty. Thirdly, the paper proposed the hypothesis that the overall effect of differentiation strategy on corporation performance is linearly significant and positively correlated, which is verified by descriptive statistical analysis, correlation analysis, multiple linear, panel data fixed effect test and other methods. Besides, the mediating effect of the pharmaceutical enterprises R&D input in the correlation between differentiation strategy and enterprise performance was put forward. Partial mediation role of R&D investment in the overall correlation is tested through descriptive statistics analysis, correlation analysis, multiple linear, effect step by step regression model and panel data fixed effects test method. The overall hypothesis was verified by examining how research and development input can influence the firm performance in year one, one lag period and two lag periods . The hypothesis of moderating effect of environmental uncertainty in the correlation between the differentiation strategy and R&D investment in the pharmaceutical enterprises was also put forward in this chapter. Moreover, the descriptive statistical analysis, the multiple linear stepwise regression model of moderating effect, and panel data fixed effects test method are used to test the hypothesis. After the empirical test, the methods of changing variables, adjusting model and piece-wise linear regression were adopted to conduct robustness test respectively, and the results all supported the conclusions. Finally, according to the analysis of the research results of each chapter, the conclusion of this paper is put forward, and the limitations of the research are found, so as to find out the direction for further research in the future. Through empirical analysis, the following conclusions are drawn: 1.When pharmaceutical firms in China implementing the differentiation strategy, it can produce a significant influence on the firm performance positively. Whether it is company financial performance or market value performance, the influence is positive. 2.The researching and developing input has a partially mediating impact on the correlation between differentiation strategy and enterprise performance. Besides, the research and development input has a significant linear as well as positive effect when relating to the corporate performance in the current period, and the second lag period. Moreover, when referring to the research and development input, there is a strong impact on corporation market value performance in the current period, and also has an obvious influence on enterprise fiscal performance in the current and the first lag period, but has a strong significant effect when refers to the firm performance in the second lag period. 3.The uncertainty of external industry environment has a moderating function on research and development input and company performance. The increase of research and development input will increase with the level of uncertainty of environment. This paper includes some major innovation points which can be reflected in three aspects: 1.This paper breaks through the limitation of single influence on enterprise performance in the past, and studies the correlation between research and development input and company performance from two aspects of enterprise fiscal and market value performance, aiming at the pharmaceutical industry, to enrich the research field in studying the relationship and interaction of the research and development input and the firm performance, broadening the research perspective, and providing practical guidance reference. 2.The mediating effect model of research and development spending on differentiation strategy and corporation performance was constructed. Besides, the regression analysis was conducted for the first and second lag periods to expand the empirical results of correlation between research spending and firm performance and to improve the robustness of research conclusions. 3.The previous studies mostly focused on static environment. This paper empirically reveals the relationship between research and developing spending and firm performance of Chinese pharmaceutical enterprises in dynamic environment, complementing the shortcomings of real empirical studies, which is more objective for the current business environment, and also provide reference in theory and practical decision-making.