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R&D innovation and the value of cash in the biotech industry

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  • Xu, Bixia

Abstract

This study investigates how the market pricing of an additional dollar of cash held by biotech firms is conditional upon the industry's typical performance, R&D innovation. Under the proposed R&D innovation regime, I find i) an additional dollar of cash is priced higher if held by a firm with higher R&D innovation; ii) the role of R&D innovation is asymmetric depending on whether R&D activities move the drug discovery and development forward or backward; and iii) R&D innovation also differentiates the association between investment opportunities and value of cash observed by prior studies.

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  • Xu, Bixia, 2009. "R&D innovation and the value of cash in the biotech industry," Journal of Business Research, Elsevier, vol. 62(7), pages 750-755, July.
    • Handle: RePEc:eee:jbrese:v:62:y:2009:i:7:p:750-755
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    1. Brunetta, Federica & Marchegiani, Lucia & Peruffo, Enzo, 2020. "When birds of a feather don't flock together: Diversity and innovation outcomes in international R&D collaborations," Journal of Business Research, Elsevier, vol. 114(C), pages 436-445.
    2. David R. Williams & Betty S. Coffey & Carlton C. Young, 2018. "Human capital and agency effects on CEO compensation of IPO biopharmaceutical firms and the market’s response," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 22(2), pages 315-337, June.
    3. Liang, Hui & Moreau, Laura & Park, Jung Chul, 2011. "Investment opportunities and dividend omissions," Journal of Business Research, Elsevier, vol. 64(10), pages 1108-1115, October.
    4. Brunetta, Federica & Boccardelli, Paolo & Lipparini, Andrea, 2015. "Central positions and performance in the scientific community. Evidences from clinical research projects," Journal of Business Research, Elsevier, vol. 68(5), pages 1074-1081.
    5. Santos, David Ferreira Lopes & Basso, Leonardo Fernando Cruz & Kimura, Herbert & Kayo, Eduardo Kazuo, 2014. "Innovation efforts and performances of Brazilian firms," Journal of Business Research, Elsevier, vol. 67(4), pages 527-535.
    6. Williams, David R., 2013. "Human and financial capital as determinants of biopharmaceutical IPO de-listings," Journal of Business Research, Elsevier, vol. 66(12), pages 2612-2618.

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