THE IMPACT OF RESEARCH AND DEVELEOPMENT ON REVENUE GENERATION AND INVESTMENT VALUATION OF INFO-TECH CORPORTIONS
Abstract
In today’s rapidly changing business world, it has become imperative for companies to be innovative, in order to stay in business. At the heart of this approach is research and development (R&D). While, R&D practices differ across industries and companies, we recognize that the practice is prevalent in the pharmaceutical and the information technology (IT/ info-tech) industries. Despite the fact, that much research has been done on R&D in the pharmaceutical industry, there is limited literature and research on the subject in the information technology industry. Consequently, this study is our effort to assess the impact of R&D on revenue generation and investment valuation of IT corporations. In this study, we investigate the impact of R&D on revenue generation and investment valuation of 40 United States (U.S.) based information technology corporations. We find that info-tech companies that invest more on R&D generate more revenue. We also find that investors place higher value on corporations that invest larger parts of their revenues on R&D. This suggests that investors expect higher earnings growth in the future of companies that invest greater parts of their revenues on R&D.
Details
| Journal Section | Articles |
|---|---|
| Authors | |
| Publication Date | January 15, 2016 |
| Published in Issue | Year 2015 Volume: 4 Issue: 4 |
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