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Do Mature Firms Gain Higher Economic Value from R&D Investment?

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Abstract

Despite the significance of economic value indicators in the measurement of firm value, not much attention has been dedicated to how research and development (R&D) influences firms’ economic value. This study examines the relationship between R&D investments and firms’ economic value and considers the moderating role of age in the relationship using a dataset from manufacturing and information and technology firms in China. The results show that R&D investments impact firms’ economic value positively. This suggests that firms that invest in R&D are rewarded with a monopoly, which increases their market shares, thereby increasing economic value. Again, we find that older firms increase their economic value more than younger ones when they both invest in R&D. Thus, younger firms in China suffer from the liability of newness when they invest in R&D. It is recommended that these younger firms should strive to shorten the time to reap the returns from R&D investments.

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Authors and Affiliations

  1. The School of Management and Economics, Center for West African Studies, University of Electronic Science and Technology of China, No.2006, **yuan Ave, West Hi-Tech Zone, Chengdu, Sichuan, People’s Republic of China

    Evans Opoku-Mensah & Yuming Yin

  2. School of Economics and Management, Changsha University of Science and Technology, Changsha 410004, Hunan Province, People’s Republic of China

    Bismark Addai

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  1. Evans Opoku-Mensah
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  2. Yuming Yin
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  3. Bismark Addai
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Correspondence to Evans Opoku-Mensah.

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Opoku-Mensah, E., Yin, Y. & Addai, B. Do Mature Firms Gain Higher Economic Value from R&D Investment?. J Ind Compet Trade 21, 211–223 (2021). https://doi.org/10.1007/s10842-020-00352-2

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  • DOI: https://doi.org/10.1007/s10842-020-00352-2

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