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R&D intensity, firm performance and the identification of the threshold: fresh evidence from the panel threshold regression model

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  • Ming-Liang Yeh
  • Hsiao-Ping Chu
  • Peter Sher
  • Yi-Chia Chiu

Abstract

This article tests whether there is an optimal level of research and development (R&D) intensity at which point a firm is able to maximize its performance. An advanced panel threshold regression model is employed to investigate the panel threshold effect of R&D intensity on firm performance among publicly traded Taiwan information technology and electronic firms. The results confirm that a single-threshold effect does exist and show an inverted-U correlation between R&D intensity and firm performance. This article demonstrates that it is possible to identify the definitive level beyond which a further increase in R&D expenditure does not yield proportional rewards. Some important policy implications emerge from the findings.

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  • Ming-Liang Yeh & Hsiao-Ping Chu & Peter Sher & Yi-Chia Chiu, 2010. "R&D intensity, firm performance and the identification of the threshold: fresh evidence from the panel threshold regression model," Applied Economics, Taylor & Francis Journals, vol. 42(3), pages 389-401.
    • Handle: RePEc:taf:applec:v:42:y:2010:i:3:p:389-401
    DOI: 10.1080/00036840701604487
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    12. Chen, Yiqi & Ibhagui, Oyakhilome W., 2019. "R&D-firm performance nexus: New evidence from NASDAQ listed firms," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
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    14. , Aisdl, 2020. "The Impact of Innovation on the Performance of Manufacturing Enterprises in Vietnam," OSF Preprints byjhc, Center for Open Science.
    15. Yue Zhu & Ziyuan Sun & Ling Wang & Xiaoping Wang & Lu Zhang, 2020. "Research on Innovation Catering Behavior and Its Economic Consequences—An Empirical Analysis Based on Threshold Regression Model," Sustainability, MDPI, vol. 12(19), pages 1-15, October.
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    18. Hoskins, Jake D. & Carson, Stephen J., 2022. "Industry conditions, market share, and the firm’s ability to derive business-line profitability from diverse technological portfolios," Journal of Business Research, Elsevier, vol. 149(C), pages 178-192.
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    20. Kuo, Chii-Shyan & Li, Ming-Yuan Leon & Yu, Shang-En, 2013. "Non-uniform effects of CEO equity-based compensation on firm performance – An application of a panel threshold regression model," The British Accounting Review, Elsevier, vol. 45(3), pages 203-214.
    21. Choi, Kanghwa & Narasimhan, Ram & Kim, Soo Wook, 2016. "Opening the technological innovation black box: The case of the electronics industry in Korea," European Journal of Operational Research, Elsevier, vol. 250(1), pages 192-203.
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    23. Minh-Hieu Le & Wen-Min Lu & Qian Long Kweh, 2023. "The moderating effects of power distance on corporate social responsibility and multinational enterprises performance," Review of Managerial Science, Springer, vol. 17(7), pages 2503-2533, October.
    24. 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.

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