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R&D Productivty: an International Study

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  • Yuan, DING

    ()

  • Hervé, STOLOWY

    ()

  • Michel, TENENHAUS

    ()

Abstract

The objective of this paper is to explore the impact of R&D expenditures on company performance. R&D activities play an essential role in the future economic development and financial performance of firms. However, with the exception of some American studies, the economic effectiveness of such investment is seldom demonstrated explicitly by the literature, and to the best of our knowledge, there are no existing studies on R&D productivity taking an international approach. Our research design is based on an earnings equation associating earnings with recorded assets, R&D expenditures and selling, general and administrative (SG&A) expenses (proxying advertising expenses). We determine a rate of return on R&D for each given sample of firms in 12 developed countries. Our results corroborate previous studies of American companies, which found that reported earnings, adjusted for the expensing of R&D, reflect realized benefits from R&D. This study confirms the positive contribution of R&D activities to future company performance, although this contribution can vary from one country to another.

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Bibliographic Info

Paper provided by HEC Paris in its series Les Cahiers de Recherche with number 781.

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Length: 39 pages
Date of creation: 01 Mar 2003
Date of revision:
Handle: RePEc:ebg:heccah:0781

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Postal: HEC Paris, 78351 Jouy-en-Josas cedex, France
Web page: http://www.hec.fr/
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Related research

Keywords: R&D productivity; R&D profitability; international study;

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References

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  1. Scherer, F M, 1982. "Inter-Industry Technology Flows and Productivity Growth," The Review of Economics and Statistics, MIT Press, vol. 64(4), pages 627-34, November.
  2. Mansfield, Edwin, 1980. "Basic Research and Productivity Increase in Manufacturing," American Economic Review, American Economic Association, vol. 70(5), pages 863-73, December.
  3. Zvi Griliches, 1984. "Market Value, R&D, and Patents," NBER Chapters, in: R & D, Patents, and Productivity, pages 249-252 National Bureau of Economic Research, Inc.
  4. Leuz, Christian & Nanda, Dhananjay & Wysocki, Peter D., 2003. "Earnings management and investor protection: an international comparison," Journal of Financial Economics, Elsevier, vol. 69(3), pages 505-527, September.
  5. Bhagat, Sanjai & Welch, Ivo, 1995. "Corporate research & development investments international comparisons," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 443-470, April.
  6. Ball, Ray & Kothari, S. P. & Robin, Ashok, 2000. "The effect of international institutional factors on properties of accounting earnings," Journal of Accounting and Economics, Elsevier, vol. 29(1), pages 1-51, February.
  7. Hirschey, Mark, 1982. "Intangible Capital Aspects of Advertising and R&D Expenditures," Journal of Industrial Economics, Wiley Blackwell, vol. 30(4), pages 375-90, June.
  8. Jan Kmenta & James B. Ramsey, 1980. "Evaluation of Econometric Models," NBER Books, National Bureau of Economic Research, Inc, number kmen80-1.
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Cited by:
  1. Salma Loulou & Mohamed Triki, 2008. "Déterminants et pertinence de l'activation des dépenses de recherche & développement dans le contexte des entreprises françaises," Post-Print halshs-00525992, HAL.

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