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Article
Publication date: 22 November 2022

Feiyang Guan, Wang Tienan and Liqing Tang

This study aims at the sudden outbreak of COVID-19, which had an unprecedented negative impact on the Chinese economy, with firms being affected most. Firms differ in…

Abstract

Purpose

This study aims at the sudden outbreak of COVID-19, which had an unprecedented negative impact on the Chinese economy, with firms being affected most. Firms differ in terms of their specific internal environment, shaping their ability to respond to the outbreak, so the impact may also vary.

Design/methodology/approach

In this paper Chinese listed firms are selected as samples to investigate the mediating effect of prior digital technology on the relationship between R&D (research and development) investment (funds and staff) and firm performance during the epidemic. Firm size and diversification are then introduced as moderating variables to explore the conditional mediating effect of digital technology.

Findings

The results indicate that the higher the firm's prior R&D investment, the higher its digital technology level, and thus the stronger its resistance to the epidemic. Moreover, compared with large-scale firms, small-scale firms have the advantage of strategic flexibility to technological changes, which can help them accumulate experience from R&D activities for digital transformation, thus attenuating the negative impact of the COVID-19 on firm performance. Finally, the results also show that digital technology mediates more strongly between R&D investment and firm performance in diversified firms than in centralized firms.

Originality/value

The study builds a mediation model to reveal the process mechanism through which R&D investment affects firm performance via digital technology. Firm size and diversification are then innovatively introduced as situational factors to build the moderated mediation model, which opens up a new perspective for understanding the effect of firm internal factors on the relationship between R&D investment, digital transformation and firm performance.

Details

Industrial Management & Data Systems, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0263-5577

Keywords

Article
Publication date: 5 October 2022

Ömer Tuğsal Doruk

In the present study, using a novel fractional logit model, the link between R&D (Research & Development) investment and shareholder value-based CEO (Chief Executive…

Abstract

Purpose

In the present study, using a novel fractional logit model, the link between R&D (Research & Development) investment and shareholder value-based CEO (Chief Executive Officer) compensation has been examined within the non-financial sector in the Euro area economies using a firm-level dataset for 2002–2019.

Design/methodology/approach

The fractional logit model is utilized to examine the effects of corporate payment on R&D investment. The fractional logit model can be considered the empirical approach that takes into account R&D non-performer firms to avoid reducing the sample size. The fractional logit model is superior to the censored or truncated models, like Tobit, since the fractional logit model is useful to address the econometric limitations that are found in the censored and truncated models in the non-linear models.

Findings

The findings obtained in this study showed a significant and negative effect of short-term aim-based CEO payment on R&D expenditures in the Euro area economies using firm-level data. These findings are robust to different robustness checks and modeling alternatives.

Originality/value

To the author's knowledge, there is no study that examines the effects of short-term shareholder value maximization-based CEO compensation on R&D in the European context in the literature.

Details

Kybernetes, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0368-492X

Keywords

Book part
Publication date: 6 April 2021

Melik Ertuğrul

This study aims to shed light on driving factors of research and development (R&D) investments by considering financial statement-based characteristics, audit quality, and…

Abstract

This study aims to shed light on driving factors of research and development (R&D) investments by considering financial statement-based characteristics, audit quality, and Schumpeterian variables. This study distinguishes between capitalized R&D investments and expensed R&D investments by taking different accounting treatments into account. Based on a sample of listed manufacturing firms on Borsa Istanbul over 2013–2018, this study concludes that (i) competition (size) decreases (increases) R&D investments, (ii) big4 auditors pay more attention to the proper accounting treatment of R&D investments, (iii) internal financing does not affect R&D investments, and (iv) liquidity (leverage and marketing expenditures) plays a positive (negative) role in only capitalized R&D investments.

Details

Strategic Outlook in Business and Finance Innovation: Multidimensional Policies for Emerging Economies
Type: Book
ISBN: 978-1-80043-445-5

Keywords

Book part
Publication date: 1 January 2014

Moren Levesque, Phillip Phan, Steven Raymar and Maya Waisman

We study the events that motivate CEOs to underinvest in R&D long-term projects (CEO myopia). Based on the existing literature in earnings management and agency theory…

Abstract

We study the events that motivate CEOs to underinvest in R&D long-term projects (CEO myopia). Based on the existing literature in earnings management and agency theory, myopia is likely to become more problematic under five circumstances: when the CEO nears retirement (the CEO horizon problem), R&D projects have very long time horizons (the project horizon problem), the firm’s financial health is deteriorating (the cover-up problem), ownership structure is heavily weighted toward insider owners (minority owner oppression problem), and when the threat of hostile takeover increases (the entrenchment problem). We setup a dynamic simulation model in which rational CEOs maximize the total value of their bonus compensation over their tenure. Our findings related to the five circumstances are consistent with the extant literature. However, we found an unexpected stable, nonlinear (inverted U-shaped) relationship between CEO tenure and R&D investment. We discuss the theoretical implications of our model and offer suggestions for future research.

Details

Corporate Governance in the US and Global Settings
Type: Book
ISBN: 978-1-78441-292-0

Keywords

Book part
Publication date: 15 November 2018

B. Anthony Billings, Cheol Lee and Jaegul Lee

The chapter examines whether the lowering of dividend taxes as part of the US Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) resulted in an increase in…

Abstract

The chapter examines whether the lowering of dividend taxes as part of the US Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) resulted in an increase in dividend payouts at the expense of research and development (R&D) spending. Using 1,206 US firm-years data, we find that R&D investments responded negatively to higher levels of dividend payout in the post-JGTRRA of 2003 tax regime compared with the pre-regime. We also find that R&D intensity and financial constraint moderate this negative relation. That is, this relation only holds for firms in low R&D-intensity industries and firms facing high levels of financial constraint. From a tax policy perspective, even though the tax cut on dividend receipts has the benefit of lowering the cost of equity capital, the benefit appears to have come at the expense of R&D investment.

Article
Publication date: 18 August 2022

Mario Ossorio

The aim of this paper is to explore the family firms' propensity to undertake R&D investments after going public, showing how it varies due to the ownership structure.

Abstract

Purpose

The aim of this paper is to explore the family firms' propensity to undertake R&D investments after going public, showing how it varies due to the ownership structure.

Design/methodology/approach

The analysis is based on a sample of 132 French and Italian family and nonfamily IPOs in the period 2013–2018.

Findings

The empirical findings show a positive relationship between the quantity of post-IPO shares retained by family owners and R&D investments. Furthermore, the abovementioned relationship is negatively affected by the generational stage and positively by the presence of a lone founder.

Practical implications

Outside investors of family firms may be assured in buying shares of founding family firms after going public because they are stimulated to undertake R&D investments and therefore create overall value in the long term. Furthermore, external managers of lone-founder and first-generation family firms can adopt innovation investments without fear of being replaced as a consequence of a hostile takeover. Lastly, private equity should support later generation family IPOs, providing them with capital and managerial skills in order to generate value for shareholders.

Originality/value

Past studies have mostly shown family firms' reluctance to undertake R&D investments; however, scholars have focused on private or public family firms, ruling out the analysis of family firms' innovation behaviour within the setting of an IPO. To the best of the author's knowledge, this study represents the first empirical attempt to investigate the relationship between family firms and post-IPO innovation investments, when the capital infusion relaxes the financial constraints of family firms.

Details

European Journal of Innovation Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1460-1060

Keywords

Open Access
Article
Publication date: 22 March 2022

Adan Guyo Shibia

This study investigates effects of firm-level, sector-level and business environment factors on manufacturing firms’ Research and Development (R&D) investment decisions…

Abstract

Purpose

This study investigates effects of firm-level, sector-level and business environment factors on manufacturing firms’ Research and Development (R&D) investment decisions in Kenya.

Design/methodology/approach

Panel Probit regression model is employed to analyse effects of the explanatory variables on manufacturing firms R&D investment decisions.

Findings

Access to external finance, lower informal sector competition, exports market participation, larger firm size and firms in high technology subsectors increase probabilities of undertaking R&D investment decisions.

Research limitations/implications

The findings underscore the need to consider institutional framework, aimed at easing business environment constraints related to access to finance, export promotion and competition from informal sector enterprises. Future research should consider cross-country analysis within the Sub-Saharan African (SSA) region to understand implications of institutional contexts that prove to be a challenge to address in a study based within a single country.

Practical implications

Policymakers need to consider addressing business environment constraints that impede R&D investments by private sector enterprises in developing countries. Formal private sector firms should design R&D investment strategies and lobby for policy interventions targeted at business environment constraints.

Originality/value

This study considers effects of variables underexplored in existing literature, notably competition from informal sector firms, R&D-intensity technological classification and an objective measure of access to finance. The study also utilises a panel survey data, which was underexplored in prior studies within SSA economies.

Details

Journal of Business and Socio-economic Development, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2635-1374

Keywords

Article
Publication date: 10 September 2021

Xi Zhong, Tiebo Song and Liuyang Ren

Based on the socioemotional wealth theory, this study aims to empirically investigate how founder reign, that is a founder serving as a cheif executive officer (CEO) or…

Abstract

Purpose

Based on the socioemotional wealth theory, this study aims to empirically investigate how founder reign, that is a founder serving as a cheif executive officer (CEO) or chairman, influences family firms' research and development (R&D) investment in emerging economies (e.g. China).

Design/methodology/approach

This study empirically tested the hypotheses based on a sample of listed Chinese family companies from 2008 to 2018.

Findings

Founder reign has a negative impact on family firms' R&D investment. Particularly, the negative impact of the founder serving as chairman on family firms' R&D investment is larger than the negative impact of the founder serving as CEO on family firms' R&D investment. Founder's military experience weakens the negative impact of founder reign on family firms' R&D investment, but founder's executive master of business administration (E)MBA experience has no moderating effect on this relationship.

Originality/value

First, the authors contribute to the family firm innovation literature by providing an alternative but complementary explanation of why family firms have relatively low R&D investment levels. This research shows that founder reign is a key reason for family firms in China eschewing R&D investment. Second, by incorporating the founder serving as CEO and the founder serving as chairman into the analytical framework, and then examining their impact on family firms' R&D investment, our research helps us to fully understand the impact of founder reign on firm strategic actions. Third, we contribute to the “founder reign-firm strategic actions” framework by revealing how founders' human capital profoundly affects the relationship between founder reign and family firms' R&D investment.

Details

European Journal of Innovation Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1460-1060

Keywords

Article
Publication date: 29 April 2021

Muhammad Zulfiqar, Shihua Chen and Muhammad Usman Yousaf

On the basis of behavioural agency theory and resource-based view, this study investigates the influence of family firm birth mode (i.e. indirect-established or…

Abstract

Purpose

On the basis of behavioural agency theory and resource-based view, this study investigates the influence of family firm birth mode (i.e. indirect-established or direct-established), family entering time on R&D investment and the moderating role of the family entering time on the relationship between birth mode and R&D investment.

Design/methodology/approach

The authors collected 2,990 firm-year observations from family firms listed on A-share in China from 2008 to 2016 in the China Stock Market and Accounting Research database. They used pooled regression for data analysis and Tobit regression for robustness checks.

Findings

Indirect-established family firms show more inclined behaviour towards R&D investment than direct-established counterparts. Family entering time positively affects the R&D investment of family firms. Moreover, family entering time plays a significant moderating role in the relationship between family firm birth mode (i.e. indirect-established or direct-established) and R&D investment.

Originality/value

To the best of the authors’ knowledge, this work is a pioneering study that introduced the concept of family firm birth mode (i.e. indirect-established or direct-established) and family entering time. This work is novel because it differentiated family firms according to their birth modes, an approach which is a contribution to the existing literature of family firms. Moreover, the investigation of the moderating role of family entering time has also produced notable results that help understand the impact of family entering time on different types of family firms. The interpretation of outcomes according to behavioural agency theory also produced useful insights for future researchers as well as for policymakers.

Details

European Journal of Innovation Management, vol. 25 no. 5
Type: Research Article
ISSN: 1460-1060

Keywords

Article
Publication date: 20 May 2021

Xin Xiang

The purpose of this study is to examine whether and how internal capital markets mitigate financial constraints and enhance firms' willingness to engage in R&D projects.

Abstract

Purpose

The purpose of this study is to examine whether and how internal capital markets mitigate financial constraints and enhance firms' willingness to engage in R&D projects.

Design/methodology/approach

The study uses panel data relating to 2,095 publicly traded firms in the Chinese A-share market for the period 2007–2019. The tobit regression method is applied to explore R&D investment–cash flow sensitivity of group affiliates, while the systematic generalised method of moments and dynamic ordinary least squares models are adopted to address the endogeneity problem in the robustness test.

Findings

This study finds that firms affiliated with business groups demonstrate lower R&D investment–cash flow sensitivity than non-affiliated firms do and that R&D investments are significantly influenced by the cash reserves of other group members. In terms of financing channels, this study demonstrates that group firms use internal cash and equity financing to support other members' R&D investments, while debt financing does not influence member firms' R&D investments. In addition, this study discovers that R&D spending harms the stock and operating performance of some group members.

Practical implications

The findings of this study enable business groups to focus on resource allocation and investment efficiency.

Originality/value

Although prior studies indicate that internal capital markets can enhance R&D spending, few studies reveal the mechanisms through which internal capital markets benefit R&D. This study uses a unique methodology to test the ability of the internal capital market to enhance R&D spending. In addition, group firms use internal cash flow and equity financing to support partners' R&D projects.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

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