This study aim at examining the threshold effect between research and development (R&D) expenditures and company performance at different firm's operating cash flow. The sample selects the electronic listed firms in Taiwan from 2001 to 2007. Empirical model uses the panel threshold autoregressive model by Hansen (1999). Our results show that there is significantly asymmetric non-linear relationship between R&D and operating performance. In other words, R&D present a positive significantly effects on firm's profit while operating cash flow is high than the specific threshold value. Additionally, R&D is found to be negative and statistically significant relationship if operating cash flow is smaller than the threshold value. It, therefore, it will erode company profitability when firm's manager raise R&D expenditures for increasing the profit in short term. Consequently, our overall results suggest that manager need to incorporate the level of operating cash flow into the R&D active to advancing firm value.