A Study on the Misallocation Effect of Capital Combination on China’s
High-tech Industry

Cao, Hui ; Chen, Chu ; Wang, Kuan

Abstract

This paper aims to investigate the misallocation effect of different capital combinations accumulated from R&D and non-R&D activity in China’s high-tech industry. Using a conceptual model, the study first establishes an equilibrium combination derived from the firm’s behavior, and then analyzes the misallocation situation in China’s high-tech industry from 2003–2016. The findings indicate that the misallocation effect becomes clearer in the Chinese high-tech industry as input increases, and increased non-R&D activity worsens the misallocation.


Keyword(s)

Capital combination; R&D expenditure; Non-R&D activity; Misallocation Effect

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