Sink or swim in the R&D pool: the relationship between peer density and streamlining

Our study explores the strategic reduction of firms' R&D investment, focusing on ‘peer R&D density’ as a main factor. This concept reflects the level of R&D engagement among competing firms. Based on organisational ecology theory, we find a U‐shaped relationship between peer R&D density and R&D streamlining, driven by legitimacy and competition resulting from high peer density. Furthermore, we examine how state ownership moderates this relationship. Using data from Chinese listed firms between 2006 and 2018, our analysis sheds light on the drivers R&D reduction and the impact of ownership structures on these dynamics. Our findings enhance the understanding of corporate survival and adaptation in research‐intensive industries, highlighting the interplay between state and market logics.