Effects of R&D and Capital Expenditure on Firm Performance: Evidence from Technology Hardware and Equipment Sector
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Date
2019-12-06
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Ankara Üniversitesi
Abstract
Past research has shown positive association with accumulated R&D intensity with firm performance; however, the exact channel and magnitude of this influence seems to vary across sectors and depend on characteristics of the sample and the performance criteria chosen. Using observations from 163 firms operating on a global scale, our study focuses on the empirical relationship between R&D expenditure and firm performance in the global technology hardware and equipment sector (ICB Code 9570), in comparison to fixed capital expenditure based on a cross-sectional regression model. We find no significant association between past R&D expenditure from 2012 to 2016 and operating margin or net margin in 2017, while the impact of past capital expenditure is significant and positive. On the other hand, accumulated R&D appears to increase firm’s future Tobin’s Q or stock-price-to-book value; which reveals a strategic function of R&D expenditure in establishing investor optimism about the future revenue stream of the firm.
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Keywords
Research and development, Capital expenditure, Firm performance