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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

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Article
Publication date: 3 August 2021

Ajay Kumar Singal and Faisal Mohammad Ahsan

Emerging economy firms seek strategic assets through cross-border acquisitions (CBAs) to upgrade their capabilities. The paper explores the relation between emerging…

Abstract

Purpose

Emerging economy firms seek strategic assets through cross-border acquisitions (CBAs) to upgrade their capabilities. The paper explores the relation between emerging economy firms' investments in CBAs and subsequent investments in domestic R&D. It investigates the underlying mechanism that links a firm's decision to pursue CBAs and the outcomes from the CBAs. The main idea behind the study is that firms have higher possibility of creating value from cross-border acquisitions when they simultaneously invest in domestic R&D though both investments are constrained by financial and managerial resources.

Design/methodology/approach

The hypotheses are tested on a panel data set of 296 Indian firms over a period of 13 years (2003–2015). The authors use a two-stage Heckman procedure for testing their hypotheses. In the first stage, a probit model predicts the probability of a firm being a cross-border acquirer. The second stage model is estimated by a pooled-data GLS (generalized least squares) regression technique.

Findings

The authors find a nonlinear (inverted U-shaped) relationship between firm's investments in CBAs and domestic R&D. This suggests a complementary relation between investments in CBAs and a firm's domestic R&D at lower levels of investments in CBAs. At higher levels of investments in CBAs, CBA investments begin to substitute for firm's domestic R&D investments. For firms with higher international product-market experience and those operating in the hi-tech industry, the relationship between investments in CBAs and domestic R&D is complementary even at higher levels of CBA investments.

Originality/value

The study highlights the role of an emerging market firm's investment in domestic R&D as a link between the decision to invest in CBAs and related outcomes thereof. Emerging market firms face resource constraints while pursuing simultaneous investments in CBAs and R&D, but investment in R&D is essential for realizing the acquisition objectives. The authors also establish the significance of industry context and experiential learning in deciding the allocation of resources between CBAs and internal R&D.

Details

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

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Article
Publication date: 16 August 2021

Hamish D. Anderson, Jing Liao and Shuai Yue

Employing the anti-corruption campaign as an exogenous political shock, this paper examines how political intervention shapes the impact of financial expert CEOs on firm…

Abstract

Purpose

Employing the anti-corruption campaign as an exogenous political shock, this paper examines how political intervention shapes the impact of financial expert CEOs on firm investment decisions.

Design/methodology/approach

This paper uses a sample of 2,808 Chinese firms listed in the Shanghai and Shenzhen Stock Exchanges from 2003 to 2016. Panel data is used for conducting the analysis controlling for firm, industry, and year fixed effects.

Findings

The authors found that CEOs with financial expertise are sensitive to political intervention when making investment decisions. First, financial expert CEOs spend more on R&D expenditure in private-owned companies and they are associated with less R&D expenditure in state-owned enterprises (SOEs). Second, financial expert CEOs are associated with higher investment expenditure in general, but they become less likely to invest more in the post-anti-corruption period. The reduction in investment expenditure due to the anti-corruption campaign is more pronounced in SOEs than in private-owned companies. Third, the anti-corruption campaign promotes R&D investment in general, but in SOEs, expert CEOs tend to be less likely to invest more on R&D after the anti-corruption shock.

Originality/value

This paper enriches the growing literature on the impact of political intervention and the role of the anti-corruption campaign on corporate behaviour.

Details

International Journal of Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1743-9132

Keywords

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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. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1460-1060

Keywords

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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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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

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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

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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.

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Article
Publication date: 13 January 2021

Xiongfeng Pan, Shucen Guo and Junhui Chu

The purpose of this paper is to explore the impact of peer-to-peer (P2P) supply chain financing on companies' innovation efficiency.

Abstract

Purpose

The purpose of this paper is to explore the impact of peer-to-peer (P2P) supply chain financing on companies' innovation efficiency.

Design/methodology/approach

This study takes the core companies that invest in the P2P platform as the research background and uses data for Chinese companies and the systematic Generalised Method of Moments (the systematic GMM) to explore the relationship between the improvement of supply chain efficiency, research and development (R&D) investment, and innovation efficiency.

Findings

This study indicates that core enterprise investment in P2P can cause a significant improvement in the efficiency of the supply chain and that this improvement can significantly motivate enterprises to increase R&D investment. Although the improvement of supply chain efficiency has no significant effect on improving companies' innovation efficiency, it can have a positive impact on innovation efficiency through the regulating role of R&D investment.

Research limitations/implications

This research shows several limitations such as single industry and few companies involved, but it analyses the impact of P2P supply chain financing on R&D investment, and companies' innovation efficiency and broadens the research field of P2P supply chain financing.

Practical implications

This article provides a theoretical direction for listed companies to invest in P2P platforms and achieve supply chain management. The research on the regulating role of this article provides a new way of thinking for the study of enterprise innovation.

Originality/value

This paper analyses the impact of the core enterprise investment in P2P on R&D investment and its subsequent impact on the companies' innovation efficiency, thus broadening the research field of P2P supply chain financing.

Details

Journal of Enterprise Information Management, vol. 34 no. 1
Type: Research Article
ISSN: 1741-0398

Keywords

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Article
Publication date: 28 December 2020

Gang Chen, Luke L. Mao, Nathan David Pifer and James J. Zhang

This study investigated the effectiveness and applicability of China’s innovation-driven policies on encouraging sports firms to invest in research and development (R&D

Abstract

Purpose

This study investigated the effectiveness and applicability of China’s innovation-driven policies on encouraging sports firms to invest in research and development (R&D) activities.

Design/methodology/approach

Through a series of multiple linear regression models, this study examined the direct and interaction effects of innovation-driven polices and firm characteristics on R&D investment for sport firms listed on the New Third Board in China.

Findings

Results showed that financing constraints and certification as a high-tech enterprise were not themselves significant predictors of R&D investment; instead, the number of R&D staff and a firm's total assets were identified as key internal factors predicting the level of a firm's R&D investment. Other effective policy tools for stimulating Chinese sport firms' R&D investments included pre-tax deductions of R&D expenses, government R&D subsidies and income tax relief for high-tech enterprises, although their effects were heterogeneous.

Research limitations/implications

This study observes a new theoretical discovery that when the financing constraints do not limit R&D investment, innovation-driven strategies remain effective tools to stimulate the R&D investment of sports firms.

Practical implications

The findings provided practical guidance for both government–industry policymakers and sport business managers to prioritize the identified areas of significance when promoting R&D.

Originality/value

First, this study focused on sport firms, which constitute a quickly growing industrial sector in China. The findings offered important insights for the government as well as corporate management with regard to promoting new industries and new enterprises. Second, this paper analyzed the effects of three special innovation-driven policies on R&D investment and explored enterprise innovation development in more detail. Third, this paper discussed not only the effects of innovation-driven policies on R&D investment but also the heterogeneity of their effects. The related conclusions could help improve the development, implementation and assessment of innovation-driven policies.

Details

Asia Pacific Journal of Marketing and Logistics, vol. 33 no. 7
Type: Research Article
ISSN: 1355-5855

Keywords

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