Does the q theory of investment work well in China?

Evidence from both the US and Chinese firm samples indicate that the R² coefficient of the investment-q regression increases as the within-firm volatility of q increases and is larger for research-intensive industries. q explains more variations of investments in the US than in China. We find that the relatively low R² coefficient in China can be explained by the heavy presence of state-owned enterprises and the larger measurement error of q in China.