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R&D Productivty: an International Study

  • Yuan, DING


  • Hervé, STOLOWY


  • Michel, TENENHAUS


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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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
Contact details of provider: Postal: HEC Paris, 78351 Jouy-en-Josas cedex, France
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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. Griliches, Zvi, 1981. "Market value, R&D, and patents," Economics Letters, Elsevier, vol. 7(2), pages 183-187.
  3. Jan Kmenta & James B. Ramsey, 1980. "Evaluation of Econometric Models," NBER Books, National Bureau of Economic Research, Inc, number kmen80-1, July.
  4. 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.
  5. Mansfield, Edwin, 1980. "Basic Research and Productivity Increase in Manufacturing," American Economic Review, American Economic Association, vol. 70(5), pages 863-73, December.
  6. 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.
  7. 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.
  8. 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.
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