Abstract
The relationship between Research and Development (R&D) and creating value has been widely discussed in the past. Most of the studies revealed that there were positive relationships between R&D investments and firm value. The research has shown that R&D investments create value for firms due to their competitive advantages for the firm, when they are used as a differentiation strategy that creates new products of processes that are hard to be easily imitated by the competitors and that this creates brand equity. This study tested the ability of R&D investments to explain returns using single and multiple variable regression models. It was observed that (i) there were positive and strong relationships between the intensity of R&D investments and returns and (ii) firm size, contrary to expectations, was not related with returns.
Keywords
References
- Acs, Z. J., D. B. Audretsch and Feldman, M. P., (1994), R&D spillovers and recipient firm size”, The Review of Economics and Statistics, 76, pp. 336-340.
- Bae, S. C. and Kim, (2003), The Effect of R&D Investments on Market value of Firms: Evidence from the U.S., Germany, and Japan, The Multinational Business Review, Vol.11, No.3, pp. 51-76.
- Bosworth, D. and Rogers, M., (2001), Market Value, R&D and Intellectual Property: An Emprical Analysis of Large Australian Firms, Economic Record, Vol. 77, Issue 239, pp. 323-337.
- Chan, K. C., J. Lakonishok and Sougiannis, T., (2001), The Stock Market Valuation of Research and Development Expenditure, Journal of Finance, Vol. 56, No. 6, pp. 2431-2456.
- Chauvin, K. W. and Hirschey, M., (1993), Advertising, R&D Expenditures and the Market Valueof the Firm, Financial Management, Vol. 22, No. 4, pp. 128-140.
- Conolly, R. A. and Hirscey, M., (1984), R&D, Market Structure and Profits: A Value Based Approach, The Review of Economics and Statistics, 66, No. 4, pp. 682-684.
- Graham R. C. and Frankenberger, K. D. (2000), The Contribution of Changes in Advertising Expenditures to Earnings and Market Values, Journal of Business Research, Vol. 50, pp. 149–155. Ho, Y. K., H. T. Keh and Ong, J. M., (2005), The Effects of R&D and Advertising on Firm Value: An Examination of Manufacturing and Nonmanufacturing Firms, IEEE Transactions on Engineering Management, Vol. 52, No. 1, pp. 3-14.
- Hsieh, P. H., C. S. Mishra and Gobeli, D. H., (2003), The Return on R&D Versus Capital Expenditures in Pharmaceutical and Chemical Industries, IEEE Transactions on Engineering Management, Vol. 50, No. 2, pp. .
- Joshi, A. and Hanssens D.M., (2010), The Direct and Indirect Effects of Advertising Spending on FirmValue, Journal of Marketing, Vol.74, January , pp. 20–33.
- Morbey, G. K., (1988), R&D: Its relationship to company Performance, Journal of Production and Innovation Management, Vol. 5, Issue. 3, pp. 191-200.
- Osinga, E. C., P.S.H. Leeflang, S. Srinivasan and Wieringa J. E., (2011), Why Do Firms Invest in Consumer Advertising with Limited Sales Response? A shareholder Perspective, Journal of Marketing, Vol. 75, January, pp. 109–124.
- Simon, Carol J. and Mary W. Sullivan (1990), The Measurement and Determinants of Brand Equity: A Financial Approach, working paper, Graduate School of Business, University of Chicago.
- Szewczyk, S. H., G. P. Tsetsekos and Zantout, Z., (1996), The Valuation of Corporate R&D Expenditures: Evidence From Investment Opportunities and Free Cash Flow, Financial Management, Vol. 25, No. 1, pp. 105-110.
Abstract
References
- Acs, Z. J., D. B. Audretsch and Feldman, M. P., (1994), R&D spillovers and recipient firm size”, The Review of Economics and Statistics, 76, pp. 336-340.
- Bae, S. C. and Kim, (2003), The Effect of R&D Investments on Market value of Firms: Evidence from the U.S., Germany, and Japan, The Multinational Business Review, Vol.11, No.3, pp. 51-76.
- Bosworth, D. and Rogers, M., (2001), Market Value, R&D and Intellectual Property: An Emprical Analysis of Large Australian Firms, Economic Record, Vol. 77, Issue 239, pp. 323-337.
- Chan, K. C., J. Lakonishok and Sougiannis, T., (2001), The Stock Market Valuation of Research and Development Expenditure, Journal of Finance, Vol. 56, No. 6, pp. 2431-2456.
- Chauvin, K. W. and Hirschey, M., (1993), Advertising, R&D Expenditures and the Market Valueof the Firm, Financial Management, Vol. 22, No. 4, pp. 128-140.
- Conolly, R. A. and Hirscey, M., (1984), R&D, Market Structure and Profits: A Value Based Approach, The Review of Economics and Statistics, 66, No. 4, pp. 682-684.
- Graham R. C. and Frankenberger, K. D. (2000), The Contribution of Changes in Advertising Expenditures to Earnings and Market Values, Journal of Business Research, Vol. 50, pp. 149–155. Ho, Y. K., H. T. Keh and Ong, J. M., (2005), The Effects of R&D and Advertising on Firm Value: An Examination of Manufacturing and Nonmanufacturing Firms, IEEE Transactions on Engineering Management, Vol. 52, No. 1, pp. 3-14.
- Hsieh, P. H., C. S. Mishra and Gobeli, D. H., (2003), The Return on R&D Versus Capital Expenditures in Pharmaceutical and Chemical Industries, IEEE Transactions on Engineering Management, Vol. 50, No. 2, pp. .
- Joshi, A. and Hanssens D.M., (2010), The Direct and Indirect Effects of Advertising Spending on FirmValue, Journal of Marketing, Vol.74, January , pp. 20–33.
- Morbey, G. K., (1988), R&D: Its relationship to company Performance, Journal of Production and Innovation Management, Vol. 5, Issue. 3, pp. 191-200.
- Osinga, E. C., P.S.H. Leeflang, S. Srinivasan and Wieringa J. E., (2011), Why Do Firms Invest in Consumer Advertising with Limited Sales Response? A shareholder Perspective, Journal of Marketing, Vol. 75, January, pp. 109–124.
- Simon, Carol J. and Mary W. Sullivan (1990), The Measurement and Determinants of Brand Equity: A Financial Approach, working paper, Graduate School of Business, University of Chicago.
- Szewczyk, S. H., G. P. Tsetsekos and Zantout, Z., (1996), The Valuation of Corporate R&D Expenditures: Evidence From Investment Opportunities and Free Cash Flow, Financial Management, Vol. 25, No. 1, pp. 105-110.
Details
| Journal Section | Articles |
|---|---|
| Authors | |
| Publication Date | September 1, 2013 |
| Published in Issue | Year 2013 Volume: 2 Issue: 3 |
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