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Short- and long-run effects of internationalization and R&D intensity on firm performance

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  • Vithessonthi, Chaiporn
  • Racela, Olimpia C.

Abstract

Investing in building new knowledge and capability is likely to benefit a firm in the long run but has a negative effect on the firm’s short-term performance. Firms that exploit their knowledge base across foreign markets better than their competitors should have superior firm performance. Using a dataset that covers all non-financial firms listed on US stock exchanges during the period 1990–2013, we show that the level of R&D intensity is negatively associated with operating performance and is positively correlated with firm value. The negative effect of R&D intensity on ROS is evident for high R&D firms and is not evident for low R&D firms. The level of internationalization has no effect on ROA, a positive effect on ROS, and a negative effect on both stock returns and Tobin’s Q. Furthermore, we document some evidence for the moderating effect of internationalization on the relationship between R&D intensity and firm performance.

Suggested Citation

  • Vithessonthi, Chaiporn & Racela, Olimpia C., 2016. "Short- and long-run effects of internationalization and R&D intensity on firm performance," Journal of Multinational Financial Management, Elsevier, vol. 34(C), pages 28-45.
    • Handle: RePEc:eee:mulfin:v:34:y:2016:i:c:p:28-45
    DOI: 10.1016/j.mulfin.2015.12.001
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    References listed on IDEAS

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    Cited by:

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    2. Muhammad Usman Yousaf & Muhammad Kashif Khurshid & Aftab Ahmed & Muhammad Zulfiqar, 2019. "Empirical investigation of relationship between research and development intensity and firm performance: The role of ownership structure and board structure," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 6(02), pages 1-27, June.
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    5. Zhou, Wei & Gu, Ruitao & Lu, Shuai, 2020. "Penetrating the real performance of SSE STAR enterprises: A double-market investigation," Finance Research Letters, Elsevier, vol. 37(C).
    6. , Le Thanh Tung, 2023. "Investment in Research and Development in an Asian emerging economy: An overview and policy implications," OSF Preprints 85adk, Center for Open Science.
    7. Piaopeng Song & Yuxiao Gu & Bin Su & Arifa Tanveer & Qiao Peng & Weijun Gao & Shaomin Wu & Shihong Zeng, 2023. "The Impact of Green Technology Research and Development (R&D) Investment on Performance: A Case Study of Listed Energy Companies in Beijing, China," Sustainability, MDPI, vol. 15(16), pages 1-24, August.
    8. Jaehong Lee & Young Soo Yang, 2019. "International Strategy, R&D Intensity, and Sustainable Earnings of Biotech Firms," Sustainability, MDPI, vol. 11(17), pages 1-17, September.
    9. Rui Wang & Yi-Na Li & Jiuchang Wei, 2022. "Growing in the changing global landscape: the intangible resources and performance of high-tech corporates," Asia Pacific Journal of Management, Springer, vol. 39(3), pages 999-1022, September.
    10. Laura Cabeza-García & Esther B. Brío & Carlos Rueda, 2021. "The moderating effect of innovation on the gender and performance relationship in the outset of the gender revolution," Review of Managerial Science, Springer, vol. 15(3), pages 755-778, April.
    11. Mbanyele, William, 2021. "Staggered boards, unequal voting rights, poison pills and innovation intensity: New evidence from the Asian markets," International Review of Law and Economics, Elsevier, vol. 65(C).
    12. Dejan Ravšelj & Aleksander Aristovnik, 2020. "The Impact of R&D Expenditures on Corporate Performance: Evidence from Slovenian and World R&D Companies," Sustainability, MDPI, vol. 12(5), pages 1-20, March.
    13. Ali Murad Syed & Zahid Riaz & Abdul Waheed, 2016. "Innovation, Firm Performance And Riskiness: Evidence From The Leading Worldwide Innovative Firms," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 20(07), pages 1-19, October.
    14. Imen Tebourbi & Irene Wei Kiong Ting & Hanh Thi My Le & Qian Long Kweh, 2020. "R&D investment and future firm performance: The role of managerial overconfidence and government ownership," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(7), pages 1269-1281, October.
    15. Leung, T.Y. & Sharma, Piyush, 2021. "Differences in the impact of R&D intensity and R&D internationalization on firm performance – Mediating role of innovation performance," Journal of Business Research, Elsevier, vol. 131(C), pages 81-91.
    16. Likitwongkajon, Napaporn & Vithessonthi, Chaiporn, 2020. "Do foreign investments increase firm value and firm performance? Evidence from Japan," Research in International Business and Finance, Elsevier, vol. 51(C).
    17. Andrea Venturelli & Fabio Caputo & Simone Pizzi, 2018. "L?impatto del contratto di rete nei processi di internazionalizzazione: alcune evidenze empiriche sulle PMI italiane," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2018(2), pages 61-83.

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    More about this item

    Keywords

    Internationalization; R&D intensity; Firm performance; Firm value;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • G1 - Financial Economics - - General Financial Markets
    • G3 - Financial Economics - - Corporate Finance and Governance

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