Abstract: Oversupply in low-value products whilst insufficiency in high-value products has been the structural problem for the Chinese manufacturing, thereby necessitating the reform of supply side. Further, we believe that the herding behavior of firm R&D is one of the main causes leading to the issue of the industrial structure. Drawing upon the dataset from the Annual Census of Chinese Industrial Enterprises, this study explores the determinants of R&D comovement and its effect on corporate performance. Government intervention and market turbulence have a positive effect on R&D comovement, while legislation environment and market competition make a negative effect. Furthermore, R&D comovement hinders corporate performance. Our findings reveal the causes of herding behavior and its effect, and offer valuable managerial implications and policy suggestions.