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R&D Increases and Long-Term Performance of Rivals

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  • Sheng-Syan Chen
  • Weifeng Hung
  • Yanzhi Wang

Abstract

We examine how a firm's research and development (R&D) increases affect its intra-industry competitors in the long run. Consistent with the R&D spillover hypothesis, when a firm unexpectedly increases its R&D spending, its intra-industry competitors experience improvements in operating performance and analyst forecast revisions and earn positive abnormal stock returns in the long run. The industry concentration, which is related to the firm's strategic reaction, is crucial in determining the magnitude of the R&D spillover effect.

Suggested Citation

  • Sheng-Syan Chen & Weifeng Hung & Yanzhi Wang, 2014. "R&D Increases and Long-Term Performance of Rivals," The Financial Review, Eastern Finance Association, vol. 49(4), pages 765-792, November.
    • Handle: RePEc:bla:finrev:v:49:y:2014:i:4:p:765-792
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    File URL: http://hdl.handle.net/10.1111/fire.12056
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    Cited by:

    1. Evans Opoku-Mensah & Yuming Yin & Bismark Addai, 2021. "Do Mature Firms Gain Higher Economic Value from R&D Investment?," Journal of Industry, Competition and Trade, Springer, vol. 21(2), pages 211-223, June.

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