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Technological Innovation and Product Market Conditions: R&D Rivalry, Market Competition, and Customer Satisfaction

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  • Choi Kyeong-Seop

    (Philosophy, Yonsei University, Seoul, Korea)

Abstract

With regard to research and development (R&D), corporate finance tends to be too broad, whereas marketing tends to be too specific. Using the marketing–finance interface, new R&D expenditure variables are constructed to reflect industry rivalry by incorporating industry-year median and standard deviation. Market competition and customer satisfaction are also included in the regression. Dynamic generalized-method-of-moments regressions based on US data provide subversive results. Sales and cash flow, which are reported in prior literature to be associated with R&D investment, were insignificant. Leverage, known as detrimental to investment in intangible assets, such as R&D, contributed to rivalrous and strategic R&D investments. Of course, high market-to-book ratios encourage such R&D investments. However, in high-tech industries, market competition absorbs all other influences on R&D, though the impact of market competition on R&D is negative. We also expect that while high customer satisfaction in the product markets could broadly serve as a suppressor to R&D, it can also serve as a driver for young and high-tech firms.

Suggested Citation

  • Choi Kyeong-Seop, 2019. "Technological Innovation and Product Market Conditions: R&D Rivalry, Market Competition, and Customer Satisfaction," Entrepreneurship Research Journal, De Gruyter, vol. 9(2), pages 1-16, April.
    • Handle: RePEc:bpj:erjour:v:9:y:2019:i:2:p:16:n:2
    DOI: 10.1515/erj-2017-0167
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