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The effect of R&D expenses on financial performance: high vs. low R&D intensity industries

Author

Listed:
  • Emanuele Teti
  • Maurizio Dallocchio
  • Giovanna Mariani
  • Aleksandra Pogodaeva

Abstract

This paper examines the effect of R&D expenditure on the financial performance of companies, by comparing a low R&D intensity industry (consumer goods) to a high R&D intensity industry (pharmaceutical). We find that in both industries innovation activities and R&D expenses bring about better financial performance. Specifically, increasing R&D intensity boosts revenues. However, this occurs, but with a time lag. Low R&D intensive companies gain benefits from R&D investments more rapidly than high R&D intensive companies. In the two industries, time lag varies due to the specificities and peculiarities of R&D procedures, product production, distribution, and other processes. Finally, the paper shows that the effect of R&D expenses varies across the companies in the industries analysed. R&D expenses in pharmaceutical companies induce higher revenue growth, compared to consumer goods firms.

Suggested Citation

  • Emanuele Teti & Maurizio Dallocchio & Giovanna Mariani & Aleksandra Pogodaeva, 2023. "The effect of R&D expenses on financial performance: high vs. low R&D intensity industries," International Journal of Business Innovation and Research, Inderscience Enterprises Ltd, vol. 31(4), pages 542-562.
    • Handle: RePEc:ids:ijbire:v:31:y:2023:i:4:p:542-562
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