Abstract: To discuss the relationship between R&D and firms’ performance, the two-way causality problem can’t be avoided. But the existing literatures pay less attention to this problem. Based on the firm-level data of Chinese manufacturing industries, our empirical research finds that: (1) the enterprises that taking R&D have superior performance in various horizons, both size and efficiency indicators, relative to the enterprises without R&D; (2) a clear explanation is that, the enterprises with R&D were better before and good enterprises were more likely to take R&D; (3) at the same time, R&D speeds up the firms’ employment and output expansion, but it has no role in promoting the growth speed of the per capita efficiency indicators; (4) On the total factor productivity(TFP), the firms that first taking R&D would have the fastest growing speed, while keeping doing R&D has no help to keep improving the TFP growth; (5) Taking R&D can reduce the risk of failure by 20% or thereabouts.