Hysteresis Effects of R&D Expenditures and Patents on Firm Performance: An empirical study of Hsinchu Science Park in Taiwan

R&D expenditures and patents are important means to improve an enterprises capacity in technological innovation, and are also drivers for sustainable development of a country. This study investigated R&D expenditures, patent quantity and performance of the top six industries in Taiwans Hsinchu Science Park for the period of 1988-2011. VAR model was used to analyze the relationship between R&D expenditures, patent and performance, and the hysteresis effect. The results showed that the governments R&D expenditures and patent quantity have a long-term and stable relationship with performance, as well as a positive correlation with performance, and a hysteresis effect on performance. The hysteresis effect of R&D expenditures and patents on performance is significantly different in different industries. These findings suggest that the governments R&D expenditures can bring economic effects to enterprises and improve enterprises innovation capacity. Thus, both government and enterprises should attach importance to R&D expenditures.