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Do Mature Firms Gain Higher Economic Value from R&D Investment?

Author

Listed:
  • Evans Opoku-Mensah

    (University of Electronic Science and Technology of China)

  • Yuming Yin

    (University of Electronic Science and Technology of China)

  • Bismark Addai

    (Changsha University of Science and Technology)

Abstract

Despite the significance of economic value indicators in the measurement of firm value, not much attention has been dedicated to how research and development (R&D) influences firms’ economic value. This study examines the relationship between R&D investments and firms’ economic value and considers the moderating role of age in the relationship using a dataset from manufacturing and information and technology firms in China. The results show that R&D investments impact firms’ economic value positively. This suggests that firms that invest in R&D are rewarded with a monopoly, which increases their market shares, thereby increasing economic value. Again, we find that older firms increase their economic value more than younger ones when they both invest in R&D. Thus, younger firms in China suffer from the liability of newness when they invest in R&D. It is recommended that these younger firms should strive to shorten the time to reap the returns from R&D investments.

Suggested Citation

  • 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.
    • Handle: RePEc:kap:jincot:v:21:y:2021:i:2:d:10.1007_s10842-020-00352-2
    DOI: 10.1007/s10842-020-00352-2
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