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Size, Leverage, Concentration, and R&D Investment in Generating Growth Opportunities


  • Yew Kee Ho

    (National University of Singapore)

  • Mira Tjahjapranata

    (Development Bank of Singapore)

  • Chee Meng Yap

    (National University of Singapore)


We show that a firm's ability to reap growth opportunities from R&D investments depends on its size, leverage, and the industry concentration. While the direct effects of these factors are significant, the size-leverage interaction reveals further important insights. Large firms' advantages over small firms disappear as their leverage increases. Specifically, small firms with high leverage reap the greatest growth opportunities. Our results provide explanations for inconsistent findings observed when size and leverage are considered independently in existing studies on value and stock return relevance of R&D investment. We also highlight firm-specific factors that guide investors' valuation of R&D.

Suggested Citation

  • Yew Kee Ho & Mira Tjahjapranata & Chee Meng Yap, 2006. "Size, Leverage, Concentration, and R&D Investment in Generating Growth Opportunities," The Journal of Business, University of Chicago Press, vol. 79(2), pages 851-876, March.
  • Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:2:p:851-876

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    Cited by:

    1. Lin, Shu-Jou & Lee, Ji-Ren, 2011. "Configuring a corporate venturing portfolio to create growth value: Within-portfolio diversity and strategic linkage," Journal of Business Venturing, Elsevier, vol. 26(4), pages 489-503, July.

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