Does negative feedback affect a firm’s R&D efficiency? An empirical study of Chinese listed firms

Based on the behavioral theory of the firm, we investigate the impact of negative feedback on R&D efficiency. The results show that when performance falls below aspirations, firms pay more attention to R&D projects with high efficiency to get rid of the operating pressure and reputation pressure caused by the decline in performance. This effect may be influenced by resource differences. In the case of negative feedback, firms with fewer idle resources have more incentive to improve R&D efficiency. Compared with state-owned firms and high-tech firms with higher resource acquisition ability, the impact of negative feedback on R&D efficiency is statistically significant only in the sample of private firms and non-high-tech firms. A firm's strategy to increase its R&D efficiency may be correct, as the improvement in R&D efficiency effectively reverses investors' expectations of the firm's future market value.