The Effect of R&D Investment on Firms’ Financial Performance: Evidence from the Chinese Listed IT Firms

DOI: 10.4236/me.2012.38114   PDF   HTML     6,148 Downloads   9,825 Views   Citations

Abstract

Technological innovation by R&D is at the core of business strategy for firms to compete in the competitive market. This paper tests the correlation between firms R&D investment intensity and the one-year lagged performance of Chinese Listed IT firms, and suggests that firms with an intensive investment strategy in R&D will have significantly larger financial performances in the following year.

Share and Cite:

Z. Zhu and F. Huang, "The Effect of R&D Investment on Firms’ Financial Performance: Evidence from the Chinese Listed IT Firms," Modern Economy, Vol. 3 No. 8, 2012, pp. 915-919. doi: 10.4236/me.2012.38114.

Conflicts of Interest

The authors declare no conflicts of interest.

References

[1] J. Lantza and J. Sahutb, “R&D Investment and the Financial Performance of Technological Firms,” International Journal of Business, Vol. 10, No. 3, 2005, pp. 251-269.
[2] M. Tubbs, “The Relationship between R&D and Company Performance,” Research-Technology Management, Vol. 50, No. 6, 2007, pp. 23-30.
[3] R. A. Connollly and M. Hirschey, “R&D, Market Structure and Profits: A Value-Based Approach,” Review of Economics and Statistics, Vol. 66, No. 4, 1984, pp. 682-686. doi:10.2307/1935995
[4] S. C. Bae and D. Kim, “The Effect of R&D Investment on Market Value of Firms: Evidence from the U.S., Germany and Japan,” Multinational Business Review, Vol. 11, No. 3, 2003, pp. 51-75. doi:10.1108/1525383X200300016
[5] B. H. Hall, G. Thoma and S. Torrisi, “The Market Value of Patents and R&D: Evidence from European Firms,” NBER Working Paper, Cambridge, 2007.
[6] M. S. Brenner and B.M. Rushton, “Sales Growth and R&D in the Chemical Industry,” Research-Technology Management, Vol. 32, No. 2, 1989, pp. 8-15.
[7] T. Sougiannis, “The Accounting Based Valuation of Corporate R&D,” Accounting Review, Vol. 69, No. 1, 1994, pp. 44-68.
[8] J. Lee, K. Whang and E. H. Hall Jr., “A Comparative Approach to the Strategic Impact of R&D and Export Activity on Firm Economic Performance in Small Business Firms: U.S., Japan and Korea,” ICSB World Conference Proceedings, Washington DC, 21-24 June 2009, pp. 1-16.
[9] Z. Zhu and J. Chen, “Synergizing Innovation Assets within an Organization under Open Environment,” 2005 International Engineering Management Conference Proceedings, St. John’s, 11-13 September 2005, pp. 372-375. doi:10.1109/IEMC.2005.1559155
[10] L. Liang and S. Yan, “Empirical Research on R&D Expenditure and Its Economic Effect of Listed Companies,” Science of Science and Management of S&T, No. 7, 2006, pp. 34-38 (In Chinese).
[11] X. Xu and Q. Tang, “The impact of R&D Activities and Innovation Patents on Firm Value—A Study on Chinese Listed Companies,” R&D Management, Vol. 22, No. 4, 2010, pp. 20-29 (In Chinese).
[12] T. Li, X. Huang and C. Wang, “An Empirical Research on Enterprise R&D Expend and Operating Performance—An Comparison between Information and Manufactur E Industry Listed Companies,” Science of Science and Management of S&T, No. 7, 2008, pp. 170-174 (In Chinese).
[13] H. Ren and P. Shi, “Literature Review on the Relationship between R&D Investment and Firm Performance—From Direct Effects to Moderating Effects,” Science of Science and Management of S&T, No. 2, 2010, pp. 143-151 (In Chinese).
[14] X. Cheng, J. Sun and L. Yao, “The Value Relevance of Capitalized R&D Expenditures: Empirical Evidences from China’s Listed Companies,” China Soft Science Magzine, No. 6, 2010, pp. 141-150 (In Chinese).
[15] R. D. Aveni, “Hypercompetition: Managing the Dynamics of Strategic Maneuvering,” The Free Press, New York, 1994.
[16] A. Drejer and J. O. Riis, “Competence Development and Technology, How Learning and Technology Can Be Meaningfully Integrated,” Technovation, Vol. 19, No. 10, 1999, pp. 631-644. doi:10.1016/S0166-4972(99)00064-4
[17] B. A. Lundvall, “The Learning Economy: Challenges to Economicy Theory and Policy,” In: K. Nielsen and B. Johnson, Eds., Institutions and Economic Change: New Perspectives on Marks, Firms and Technology, Edward Elgar, Cheltenham, 1998.
[18] R. M. Grant, “Prospering in Dynamically-Competitive Environments: Organizational Capability as Knowledge Integration,” Organization Science, Vol. 7, No. 4, 1996, pp. 375-387. doi:10.1287/orsc.7.4.375
[19] W. M. Cohen and D. A. Levinthal, “Innovation and Learning: The Two Faces of R&D,” The Economic Journal, Vol. 99, No. 397, 1989, pp. 569-596. doi:10.2307/2233763
[20] W. M. Cohen and D. A. Levinthal, “Absorptive Capacity: A New Perspective on Learning and Innovation,” Administrative Science Quarterly, No. 35, No. 1, 1990, pp. 128-152. doi:10.2307/2393553
[21] D. A. Mank and H. E Nystrom, “Decreasing Returns to Shareholders from R&D Spending in the Computer Industry,” Engineering Management Journal, Vol. 13, No. 3, 2001, pp. 3-8.

  
comments powered by Disqus

Copyright © 2020 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.