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Determinants of R&D intensity and its impact on firm value in an innovative economy in which family business groups are dominant: The case of South Korea

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  • Byung S. Min
  • Russell Smyth

Abstract

We examine both the determinants of corporate research and development (R&D) intensity, and its impact on firm value, in Korea, a country in which family business groups are dominant and in which corporate-funded R&D intensity is one of the highest in the world. We find that growth opportunities, size of the firm and payment to executive board members have a positive effect on R&D intensity, while leverage has a negative effect on R&D intensity. When leverage is at an extremely high level, the relationship between growth opportunities and R&D intensity turns from positive to negative. The positive effect of firm size on R&D intensity is larger, the greater the number of subsidiaries the firm has, consistent with the firm engaging in cross-subsidisation. The positive effect of payments to executive board members on R&D intensity is smaller for chaebol affiliates than for stand-alone firms. Using instrument variables we find that R&D generates an increase in firm value.

Suggested Citation

  • Byung S. Min & Russell Smyth, 2015. "Determinants of R&D intensity and its impact on firm value in an innovative economy in which family business groups are dominant: The case of South Korea," Monash Economics Working Papers 25-15, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2015-25
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2015/2515researchdevelopmentminsmyth.pdf
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    Cited by:

    1. Darya Dancaková & Jakub Sopko & Jozef Glova & Alena Andrejovská, 2022. "The Impact of Intangible Assets on the Market Value of Companies: Cross-Sector Evidence," Mathematics, MDPI, vol. 10(20), pages 1-14, October.

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    Keywords

    family business; R&D; innovative economy; firm value; chaebol;
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