The Relationship Between R&D Spending Instability and a Firm’s Performance
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216224%3A14560%2F17%3A00096364" target="_blank" >RIV/00216224:14560/17:00096364 - isvavai.cz</a>
Result on the web
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DOI - Digital Object Identifier
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Alternative languages
Result language
angličtina
Original language name
The Relationship Between R&D Spending Instability and a Firm’s Performance
Original language description
The link between investment in innovation and subsequent change in the competitive advantage or performance of a firm is one of the most frequently studied topics with a huge importance for strategic management. The relationship has been mostly confirmed under additional influencing factors, with the form of innovation investments arguably being one of them. The research following the behavioral theory of the firm assumes that a firm adjusts its R&D spending in accordance to performance feedback. This feedback stems from the comparison of the current firm performance with its historical aspiration, historical performance and performance of firms constituting its social benchmark. When this aspiration is not attained, a firm is motivated to change which results in a change in R&D spending. A firm that is subject to this performance feedback continuously adjust its investment level—not because of changes in the research potential or deployment of a new strategy, but because of performance fluctuations, which can be caused by countless reasons, some of them outside a firm’s control. In this research, it is argued that an increased fluctuation of a firm’s R&D expense is related to a reduced financial performance. This hypothesis is tested on a sample of large German industrial firms listed on stock exchange markets followed between the years 2001 and 2015. Using fixed and random effects panel data models, the R&D instability measured by three-year and five-year standard deviations is related to financial performance levels measured by return on assets, return on equity and profit margin. Results support the proposed relationship between R&D expense instability and the subsequent financial performance of a firm. Although a causal link cannot be clearly established, the results indicate that firms with a lower financial performance have higher R&D investment fluctuations.
Czech name
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Czech description
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Classification
Type
D - Article in proceedings
CEP classification
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OECD FORD branch
50600 - Political science
Result continuities
Project
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Continuities
S - Specificky vyzkum na vysokych skolach
Others
Publication year
2017
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Article name in the collection
Proceedings of the 5th International Conference on Management, Leadership and Governance
ISBN
9781911218272
ISSN
2049-6818
e-ISSN
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Number of pages
8
Pages from-to
495-502
Publisher name
Academic Conferences and Publishing International Limited
Place of publication
Reading
Event location
Johannesburg
Event date
Jan 1, 2017
Type of event by nationality
WRD - Celosvětová akce
UT code for WoS article
000404892000061