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Examining the Interactive Endogeneity Relationship between R&D Investment and Financially Sustainable Performance: Comparison from Different Types of Energy Enterprises

Author

Listed:
  • Kalon Si

    (College of Social Science, Tsinghua University, Beijing 100084, China)

  • Xin Long Xu

    (College of Tourism, Hunan Normal University, Changsha, Hunan 410081, China)

  • Hsing Hung Chen

    (School of Business, Macau University of Science and Technology, Taipa, Macau 999078, China)

Abstract

This paper employs the cluster analysis to classify the energy sector into three types, namely, technology-, capital-, and labor-intensive energy company. It then studies the interactive endogenous relationship between R&D investment and financially sustainable performance and the moderate effect of the executive incentive through three-stage least squares (3SLS) of the simultaneous equations model (SEM). The results show that for the technology-intensive energy company, an increase in the previous period in R&D investment improves the current period of financially sustainable performance, and the improvement in the current period in financially sustainable performance results in a decline in financially sustainable performance in the next period, which demands an increase in R&D investment subsequently. In contrast, for the capital-intensive energy company, R&D investment can significantly improve the financially sustainable performance in the current period, and the improvement in financially sustainable performance can also promote the intensity of next period R&D investment. For the labor-intensive energy company, R&D investment depends on the company’s previous period returns, while R&D investment has no significant impact on the financially sustainable performance in the current period and the next period. In addition, the salary incentives for executives have a significant positive moderate effect on the relationship between R&D investment and financially sustainable performance, especially in the technology-intensive energy company, while equity incentives for executives do not show any significant effect in the sample for different types of companies.

Suggested Citation

  • Kalon Si & Xin Long Xu & Hsing Hung Chen, 2020. "Examining the Interactive Endogeneity Relationship between R&D Investment and Financially Sustainable Performance: Comparison from Different Types of Energy Enterprises," Energies, MDPI, vol. 13(9), pages 1-15, May.
    • Handle: RePEc:gam:jeners:v:13:y:2020:i:9:p:2332-:d:355113
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