Showing papers on "R&D intensity published in 2015"

Why Does Financial Sector Growth Crowd Out Real Economic Growth

Abstract: In this paper we examine the negative relationship between the rate of growth of the financial sector and the rate of growth of total factor productivity. We begin by showing that by disproportionately benefiting high collateral/low productivity projects, an exogenous increase in finance reduces total factor productivity growth. Then, in a model with skilled workers and endogenous financial sector growth, we establish the possibility of multiple equilibria. In the equilibrium where skilled labour works in finance, the financial sector grows more quickly at the expense of the real economy. We go on to show that consistent with this theory, financial growth disproportionately harms financially dependent and R&D-intensive industries.

The role of reference point in CEO restricted stock and its impact on R&D intensity in high-technology firms

Abstract: Prior work based on agency theory and behavioral agency model has focused on how absolute pay values affect firm outcomes. Departing from this traditional approach, we draw from behavioral decision theory to explain how relative pay levels influence firm risk taking. We investigate how CEO restricted stock value relative to reference point influences R&D intensity in high-technology firms. We propose that negative deviation increases are related to R&D increases and positive deviation increases lead to R&D decreases, while negative deviation has greater effect than positive deviation. We establish theoretical boundary conditions by considering CEO duality and board vigilance as moderators. Drawing from agency theory, we predict the main effects will be enhanced under duality and weakened under high board vigilance. Our hypotheses are largely supported. Copyright © 2014 John Wiley & Sons, Ltd.

R&D Investment and Distress Risk

Abstract: This paper proposes that besides volatility, R&D can increase firms' distress risk through another channel. Unlike capital investment, R&D is more inflexible and subject to high adjustment costs. Moreover, R&D intensive firms face severe financial constraints and are more likely to suspend/discontinue R&D projects. Therefore, firms' distress risk increases with their R&D intensity. Using a large panel of US companies over the 1980 to 2011 period, I find a robust empirical relation between R&D and distress risk, primarily among financially constrained firms. Moreover, the effect of R&D on distress risk is magnified during economic downturns. I also find firms that have been previously successful in R&D or firms with high analyst coverage can mitigate the relationship between R&D and distress risk.

CEO innovation orientation and R&D intensity in small and medium-sized firms: the moderating role of firm growth

Abstract: Although upper echelon literature has found evidence for the effect of executives’ characteristics on firm strategy such as the level of research and development (R&D) intensity, research on how different behaviors, values, personalities, motivations, and experiences of executives influence the R&D intensity of small and medium-sized firms is scarce. Applying upper echelon theory, this study uses firm growth (sales and employee growth) as a contingency factor to analyze variations in the effect of chief executive officer (CEO) innovation orientation on R&D intensity in small and medium-sized firms. As research on the direct effect of firm growth on R&D intensity is inconclusive, this study applies firm growth as an indirect effect to show whether the impact of CEO innovation orientation on R&D intensity differs in times of low growth compared to times of high growth in small and medium-sized firms. Using a sample of 77 German CEOs of small and medium-sized firms operating in manufacturing industries, results show that CEO innovation orientation has a positive effect on R&D intensity, and firm growth affects this relationship. Specifically, high CEO innovation orientation has a positive effect on R&D intensity in firms with low growth, while its impact disappears in firms that experience strong growth. Implications and future research are discussed.

The influence of R&D intensity of countries on the impact of international collaborative research: evidence from Spain

Abstract: A positive influence of international collaboration on the impact of research has been extensively described. This paper delves further into this issue and studies to what extent the type of collaborating country--high, medium or low R&D intensive country--and which country is the leader in the research may influence the impact of the final scientific output. Among 9,961 papers co-authored by scientists from Spain and from another country (bilateral collaboration) during 2008---2009, papers with high R&D intensive countries predominated (60 %) and received the highest number of citations. This holds true in eight out of nine fields, being Social Sciences the one which benefited the most from partnerships with high R&D intensive countries. Mathematics emerges as a special case where other factors such as the partner's specialisation in the field may have a greater influence on research impact than the level of investment in R&D of the collaborating country. No significant influence of the type of country leading the research on the impact of the final papers is observed in most fields. Research policy implications are finally discussed.

Factors affecting product innovation performance according to dynamics of environment: evidence from Korean high–tech enterprises in manufacturing sector

Abstract: Recently product innovation is essential for high–tech enterprises to achieve the competitive advantages. Therefore, enterprises have to develop the optimal strategy that can effectively and directly increase the product innovation performance (PIP) while considering the changing pace and innovation dynamics of their industries. Although previous research revealed innovation factors that affect product innovation, few research has considered the direct influence of the factors on PIP with considering the differences of the relative importance of the factors according to the product innovation cycle time. The purpose of this paper is to identify the factors directly affecting on PIP and compare the relative importance of the factors in dynamic and non–dynamic environment. To this end, we conducted ordinary least square regression analysis using an empirical data extracted from Korea Innovation Survey 2010. Regression results reveal that some factors are only effective for the dynamic environment while some factors affect both environments.

Geographical knowledge search, internal R&D intensity and product innovation of clustering firms in Zhejiang, China†

Abstract: While a great deal of literature has paid attention to knowledge spillover on innovation, this study argues that geographical knowledge search that lays much emphasis on firm strategies merits more attention. This paper examines the effect of geographical knowledge search strategies, such as local/non-local search depth and local/non-local search breadth on product innovation. We reveal that while local search depth and breadth as well as non-local search breadth exert a significant influence, non-local search depth produces a negative impact on product innovation. Our research suggests that clustering firms' geographical knowledge search strategies and R&D intensity should be highlighted to understand their product innovation.

Firm innovativeness — the sufficient condition for business success? examining antecedents of firm innovativeness and how it affects business success

Abstract: The continuous development and introduction of new products has been addressed by companies of all industries through continuously high investments to foster a firm's ability to successfully develop and introduce innovations and new technologies (firm innovativeness). However, it still lacks empirical evidence about the direct antecedents of firm innovativeness and how this ability contributes to firm success. Moreover, previous literature often restricts the operationalisation of firm innovativeness to quantitative indicators, like the number of patents a company possesses, as its sole indicator. The present paper tries to close this gap by measuring effects of firm innovativeness on business success using a mixed measure of patent counts and patent citations thereby accounting for not only quantitative but also qualitative requirements. Furthermore our study is the first to determine the relative effect of R&D intensity and innovation experience as direct antecedents of firm innovativeness. We use secondary data from 246 Fortune 500 and S&P 500 to test our model. The model results show that our combined measure clearly captures firm innovativeness and represent a good predictor of business success. Moreover, our results point out that firm innovativeness is primarily influenced by R&D intensity. Also notably, our results confirm the often questioned statement that smaller firms are indeed better to translate innovativeness into business success.

Post-Catch-Up Strategy for Medium-Sized South Korean Firms: Improving Technological Capabilities by Balancing R&D Intensity and Open Innovation

Abstract: This study examines how R&D intensity and open innovation affect the technological capabilities of firms in newly-developed countries, such as South Korea. East Asian latecomers are transitioning from a catch-up phase toward becoming leaders, and they are engaging in open innovation activities to drive this transition. This research quantitatively analyzes three kinds of open innovation activities—outside-in, inside-out, and coupled—to investigate their influence upon technological capabilities, while also considering the effect of R&D intensity. Data from 75 South Korean medium-sized firms were analyzed, and two major findings are reported. First, technological capabilities are enhanced by some open innovation activities and by R&D intensity. Second, R&D intensity negatively moderates the impact of open innovation activities on technological capabilities. Therefore, it may be concluded that firms with relatively low R&D intensity will gain the most benefit from increasing their open innovation ac...

R&D Intensity: An Empirical Analysis of its Relation to the Structure of the Manufacturing Sector in OECD Countries

Abstract: The R&D Intensity (RI) indicator is widely used by analysts and policymakers as a proxy of a country's commitment to research and development (R&D), international comparisons, and goal setting. However, many researchers believe that this indicator is not only reflecting R&D commitment, but also the industrial structure in which R&D was carried out. It is believed that calculating a separate RI for each industrial class will reveal a more representative indication of the focus of a country in that particular class. In this study, the disaggregated R&D Intensity was named “Class-RI”. Validation type analyses were conducted on Class-RI to find out if it’s associated with certain logical output measures such as the Value Added to production. The study demonstrated the effectiveness of the disaggregated indicator and revealed some promising results that can support its use in scholarly research.

Essays on risk, stock return volatility and R&D intensity

Abstract: This thesis consists of three empirical essays studying the capital market implications of the accounting for R&D costs. The first empirical study (Chapter 2) re-visits the debate over the positive R&D-returns relation. The second empirical study (Chapter 3) examines the risk relevance of current R&D accounting. The third empirical study (Chapter 4) explores the joint impact of R&D intensity and competition on the relative relevance of the idiosyncratic part of earnings. Prior research argues that the positive relation between current R&D activity and future returns is evidence of mispricing, a compensation for risk inherent in R&D or a transformation of the value/growth anomaly. The first empirical study contributes to this debate by taking into account the link between R&D activity, equity duration and systematic risk. This link motivates us to employ Campbell and Vuolteenaho (2004a)’s intertemporal asset pricing model (ICAPM) which accommodates stochastic discount rates and investors’ intertemporal preferences. The results support a risk based explanation; R&D intensive firms are exposed to higher discount rate risk. Hedge portfolio strategies show that the mispricing explanations is not economically significant. The second empirical study contributes to prior research on the value relevance of financial reporting information on R&D, by proposing an alternative approach which relies on a return variance decomposition model. We find that R&D intensity has a significant influence on market participants’ revisions of expectations regarding future discount rates (or, discount rate news) and future cash flows (or, cash flow news), thereby driving returns variance. We extend this investigation to assess the risk relevance of this information by means of its influence on the sensitivity of cash flow and discount rate news to the market news. Our findings suggest R&D intensity is associated with significant variation in the sensitivity of cash flow news to the market news which implies that financial reporting information on R&D is risk relevant. Interestingly, we do not establish a similar pattern with respect to the sensitivity of discount news to the market news which may dismiss the impact of sentiment in stock returns of R&D intensive firms. The third empirical study examines the effect of financial reporting information on R&D to the value relevance of common and idiosyncratic earnings. More specifically,

Group affiliation, R&D and firm performance: empirical evidence from Indian manufacturing sector

Abstract: The purpose of the current study is to compare the performance of firms affiliated to business groups with that of independent (stand-alone) firms in the Indian context. Specifically, the study tries to find out the differences in research and development (R&D) intensity, between the two categories of firms, and its impact on profitability. The analysis has been carried out for firms from three industries in the Indian manufacturing sector. The time period considered is from 2004 to 2013. The findings reveal that group-affiliated firms generally overspend on R&D activities. This spending, however, does not translate into higher profitability. The panel data analysis also shows that there exist a nonlinear relationship between R&D intensity and profitability. Thus, it can be concluded that group firms, which overspend on R&D activities generally do not perform as efficiently as the stand-alone firms. Therefore, firms affiliated to business groups should reconsider their R&D strategy in order to enhance their profitability.

Do R&D and licensing strategies influence start-ups' growth?

Abstract: The present paper estimates the effects of US start-ups' R&D and licensing strategies on their growth, based on R&D intensity, start-ups' patents and in-licensing and out-licensing activities. To do so, we test a sample of 818 firms included in the Kauffman Foundation Survey, from the high-tech and medium high-tech sectors in the period 2004-2010. We reveal a positive and significant effect of R&D intensity and in-licensing on start-ups' growth. These conclusions are also ratified when controlling the activity sector, which has a major effect on sectors such as high-tech manufacturing industries and high-tech knowledge intensive services.

How much is too much - equilibrium points for good export and R&D intensity: Data of world top 2000 companies

Abstract: Dynamic capabilities, as vehicles to cope with environmental changes, have become extremely popular due to constantly high environmental turbulence. There exist wide variety of capabilities, two most popular ones in globalized and fast changing world are R&D and export. From exploration-exploitation perspective of company, both capabilities have explorative tendencies, interdependent to each-other and fighting for the same resources - can they successfully co-exist? Data from the world top 2000 companies - including Shell, Samsung and Johnson & Johnson - provide evidence for successful ambidexterity of capabilities. As an interesting outcome, both capabilities independently have own equilibrium point for successful operation. Findings indicate that top companies' equilibrium point for export intensity is around 61% and for R&D intensity around 30%.

Economic Growth: Education vs. Research

Abstract: Barro and Sala-i-Martin analyzed the empirical determinants of growth. They used a cross-sectional empirical framework that considered growth from two kinds of factors, initial levels of steady-state variables and control variables (e.g., investment ratio, infrastructure). Recent literature suggests that education is important in determining steadystate growth. Sequeira Following Baumol, we also consider the growth regression. We extend the previous research for Asian countries of Kim to developed countries. Following the implications of semi-endogenous growth theory, we regressed output growth on a constant, one-year lagged output (initial income) and the determinants of steady-state income [investment rate, population growth, the quadratic (or linear) function of R&D intensity and human capital measured by years of schooling or enrollment rate in secondary school]. The regression suggests higher significance in research efforts. This contradicts with that of Sequeira, which asserts the speed is determined by only education, preference and technology parameter. The coefficients for the determinants of steady-state income, especially for the quadratic function of R&D intensity, are significant and occur in the expected direction. Our results suggests that adopting appropriate growth policy related with R&D, an economy can grow more rapidly through transition dynamics or changing fundamentals.

Determinants of R&D intensity and its impact on firm value in an innovative economy in which family business groups are dominant: The case of South Korea

Abstract: We examine both the determinants of corporate research and development (R&D) intensity, and its impact on firm value, in Korea, a country in which family business groups are dominant and in which corporate-funded R&D intensity is one of the highest in the world. We find that growth opportunities, size of the firm and payment to executive board members have a positive effect on R&D intensity, while leverage has a negative effect on R&D intensity. When leverage is at an extremely high level, the relationship between growth opportunities and R&D intensity turns from positive to negative. The positive effect of firm size on R&D intensity is larger, the greater the number of subsidiaries the firm has, consistent with the firm engaging in cross-subsidisation. The positive effect of payments to executive board members on R&D intensity is smaller for chaebol affiliates than for stand-alone firms. Using instrument variables we find that R&D generates an increase in firm value.

Business Group Effects on the Innovation-Internationalization Relationship: Evidence from the Indian Pharmaceutical Sector

Abstract: We combine insights from the strategic management and international business literatures in order to explore the moderating role of business group characteristics on the link between innovation and internationalization in the context of the pharmaceutical sector in India. We test our three hypotheses on a sample of 219 Indian pharmaceutical firms affiliated with business groups, over a five-year period (2005–2010) in a panel of 1,096 firm-year observations. Results indicate that, contrary to our contention, research expenditure is negatively associated with export intensity, implying that firms in the Indian pharmaceutical sector may face a trade-off between investing in innovation and international expansion. As expected, business group characteristics significantly impact the strength of the relationship between innovation and internationalization. Theoretical and practitioner implications are discussed.

R&D and Intangibles

Abstract: Empirical studies have established that corporate intangibles assets such as Research and Development (R&D), employee satisfaction, firm reputation and celebrity status, are valued by market participants R&D expenditures lead to higher future profitability and stock market investors price them positively These investments do not appear to be superior since the average stock returns of R&D and non-R&D firms are comparable However, portfolios of high R&D intensity and of large unexpected increases in R&D earn positive future abnormal returns This has sparked an ongoing debate as to whether the abnormal returns represent investor mispricing or compensation for risk Since R&D spending is treated as a period expense in the financial reports, the potential mispricing has also been attributed to the limited disclosures and accounting practiced Financial analysts appear to play an important role in compensating for R&D-related financial reporting deficiencies but the compensation is far from complete Successful R&D activity leads to patents which have also been shown to be positively associated with stock market values and future earnings However, results show that neither analysts nor investors appear to fully understand the implications of patent information Overall, there is a need for continued effort by policy makers to address intangibles-related information deficiencies Keywords: RD RD RD intangibles; patents; market valuation; mispricing; risk; financial analysts; innovative efficiency

Research and development disclosure information on internet by multinational corporations

Abstract: This article focuses on R&D disclosure information on internet by multinational corporations. We tried to identify factors that influence the internet R&D disclosure of these corporations. An index of R&D disclosure is constructed based on analysis of the websites of 145 corporations from 20 countries, selected from the Fortune Global 500 list, at March 2009. Several hypotheses about associations between that index and 11 independent variables are tested. These independent variables comprise both company-specific internal factors and external factors related to the environmental context of the company. Our findings show that internationality degree, industry type, firm size and R&D intensity are the main factors that explain the differences in the extent of corporate R&D disclosure on the internet.

Changes in the Revealed Comparative Advantage of South Korea and Her Major ASEAN Trading Countries

Abstract: This study of revealed comparative advantage of South Korea and her major ASEAN trading countries in the manufacturing sector for the period of 2000-2010 found that South Korea exported products which are less skilled human capital intensive and more R&D intensive for most of the period. Indonesia, Thailand, and Vietnam are found to have exported products which are less physical (and skilled human) capital intensive and less R&D intensive for the entire period. It was found that Malaysia and Philippines exported products which are less physical (and skilled human) capital intensive. Singapore is found to have exported products which are more R&D intensive for the entire period.

Link Between R&D Intensity and Market Concentration: Analysis of Brazilian Corn and Soybean Seed Markets

Abstract: As one of the main producers of corn and soybeans in the last three decades, Brazil’s expanded production could be explained by productivity enhancements that have occurred with the introduction of innovations in their seed markets However, these markets also experienced a reconsolidation in the form of a market concentration We aimed to test the hypothesis that there is an inverse relationship between these factors at the seed market To test this hypothesis, we applied a GMM with instrumental variables to a theoretical framework Results suggested that this link depends on market characteristics, such as in which year GMO were introduced In the first period for corn, the relationship between these factors was direct, but after the GMO introduction, the relationship became inverse; alternatively, for soybeans, this dynamic was inverted In addition, we found out that the public investment and propriety-rights regulations were important to determining the R&D intensity