R&D investment and SMEs performance: the role of capital structure decisions
Abstract
Purpose
This paper examines the moderating role of capital structure decisions in the relationship between research and development (R&D) investment and small and medium enterprises (SMEs) performance.
Design/methodology/approach
Based on panel data of 1,357 European SMEs from 2014 to 2020, this study employs a generalized method of moments (GMM) regression to examine the R&D-performance link through the moderating role of capital structure.
Findings
The results show that R&D investment and equity financing positively and significantly influence SMEs performance. Debt financing, however, is negatively and significantly associated with SME performance. In addition, we show that capital structure choice significantly moderates the relationship between R&D investment and SME performance. Specifically, debt financing attenuates the positive impact of R&D investment on SMEs performance, whereas equity financing accentuates this relationship.
Practical implications
This study helps policymakers formulate appropriate policies to overcome the challenges of underinvestment in R&D projects to enhance SMEs performance.
Originality/value
Our findings provide new evidence on R&D-performance literature by refining the deeper understanding of the role of capital structure, which has previously been examined in partial and fragmented ways.
Keywords
Acknowledgements
We extend our sincere appreciation to the Editor-in-Chief, Prof. Demetris Vrontis, Associate Editor Dr Senmao Xia, and the two anonymous reviewers whose insightful comments and suggestions significantly enhanced the quality of our paper. We also express gratitude to the participants of the 2nd International Conference on Accounting, Auditing, and Finance (ICAAF-2022), held November 21-23, 2022, at the University of Western Australia in Perth, for their valuable feedback on the earlier draft of this paper.
Citation
Ali, S., Muhammad, H. and Migliori, S. (2024), "R&D investment and SMEs performance: the role of capital structure decisions", EuroMed Journal of Business, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/EMJB-11-2023-0311
Publisher
:Emerald Publishing Limited
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