The role of R&D investments in highly R&D-based firms
Abstract
Purpose
This paper aims to examine the short-term structure of the impact of R&D investments on turnover growth, indicating differences between tangible and intangible investments. The main questions are whether R&D and capital investments accompany firms' growth in the subsequent periods and how this relationship depends on other characteristics of the firms, such as size and industry. In addition, the authors study the relationship between R&D investments and the autocorrelation dynamics of firm growth.
Design/methodology/approach
The paper uses the European Industrial R&D Investment Scoreboard as data source. This data source includes 1,000 European companies with information on employees, turnover, sector affiliation and details on capital expenditure and R&D expenditure.
Findings
The authors find that R&D activities have, on average, a positive effect on turnover growth, while capital investments show both, positive and negative, relationships with firm growth. The relationship and its temporal structure strongly depend on firm size and industry affiliation as well as whether investments are considered as one-time or permanent activities.
Originality/value
Usually, the impacts of firm characteristics on firm growth are studied without explicitly considering time. Firm characteristics and firm growth are usually measured and examined at the same point in time. In contrast, the study will focus on the short-term structure of the influence of firm characteristics on turnover growth, especially the impact of R&D investments.
Keywords
Acknowledgements
JEL classification – G32, L60, M21, O32 The authors would like to thank the editors, two anonymous referees, and the participants of the EMAEE: 2011 European Meeting on Applied Evolutionary Economics, in Pisa (Italy) for their fruitful and helpful comments, as well as the Karlsruhe House of Young Scientists (KIT) for its financial support.
Citation
Schimke, A. and Brenner, T. (2014), "The role of R&D investments in highly R&D-based firms", Studies in Economics and Finance, Vol. 31 No. 1, pp. 3-45. https://doi.org/10.1108/SEF-02-2012-0017
Publisher
:Emerald Group Publishing Limited
Copyright © 2014, Emerald Group Publishing Limited