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An Empirical Study on the Relationship between R&D and Financial Performance

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  • Feng-Jui Hsu
  • Mu-Yen Chen
  • Yu-Cheng Chen
  • Wei-Chieh Wang

Abstract

This study investigates the relationship between R&D investment, patent filings and financial success for firms. Firms which have high degrees of R&D investment and large numbers of patents are referred to as “high innovation energy corporations†. This study investigates the financial performance of such firms among a sample of Taiwanese high-tech companies from 2000 to 2011. Findings indicate that the lag between R&D expense and benefit, and the lead periods for patents (i.e., the duration of the application process) significantly affect stock returns. Moreover, these delays and a firm’s R&D expense rate also impact net sales. In other words, firms with a high level of innovative energy have better stock returns and net sales, but such firms do not have an advantage in terms of operating income. Empirical results indicate that higher R&D expenses increase operating costs which, in turn, decreases operating income despite increased net sales.

Suggested Citation

  • Feng-Jui Hsu & Mu-Yen Chen & Yu-Cheng Chen & Wei-Chieh Wang, 2013. "An Empirical Study on the Relationship between R&D and Financial Performance," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 3(5), pages 1-9.
    • Handle: RePEc:spt:apfiba:v:3:y:2013:i:5:f:3_5_9
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    Citations

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    Cited by:

    1. Tohru Yoshioka-Kobayashi & Tomofumi Miyanoshita & Daisuke Kanama, 2020. "Revisiting incremental product innovations in the food-manufacturing industry: an empirical study on the effect of intellectual property rights," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 9(1), pages 1-19, December.
    2. Mengning He & Raquel Pérez Estébanez, 2023. "Exploring the Relationship between R&D Investment and Business Performance—An Empirical Analysis of Chinese ICT SMEs," Sustainability, MDPI, vol. 15(6), pages 1-17, March.
    3. Muhammad Usman Yousaf & Muhammad Kashif Khurshid & Aftab Ahmed & Muhammad Zulfiqar, 2019. "Empirical investigation of relationship between research and development intensity and firm performance: The role of ownership structure and board structure," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 6(02), pages 1-27, June.
    4. Yu-Hui Wang, 2016. "Identifying competitive intelligence of collaborative intellectual property alliances: analytic platform and case studies," Information Systems and e-Business Management, Springer, vol. 14(3), pages 491-505, August.
    5. Mihaela DIACONU, 2019. "Business R&D investments in the EU: Main dynamics and economic effects," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(621), W), pages 19-34, Winter.
    6. Narinder Pal Singh & Sugandha Sharma, 2018. "Cointegration and Causality among Dollar, Oil, Gold and Sensex across Global Financial Crisis," Vision, , vol. 22(4), pages 365-376, December.
    7. Ali Ostadhashemi & Muhammad Esmaeil Fadaei Nejad, 2019. "To study moderating role of ownership structure on R&D expenditure policies on accounting performance and market value," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 6(01), pages 1-18, March.
    8. Mithun Nandy, 2020. "Is There Any Impact of R&D on Financial Performance? Evidence from Indian Pharmaceutical Companies," FIIB Business Review, , vol. 9(4), pages 319-334, December.
    9. repec:agr:journl:v:4(621):y:2019:i:4(621):p:19-34 is not listed on IDEAS
    10. Dejan Ravšelj & Aleksander Aristovnik, 2020. "The Impact of R&D Expenditures on Corporate Performance: Evidence from Slovenian and World R&D Companies," Sustainability, MDPI, vol. 12(5), pages 1-20, March.
    11. Alina Okun & Randall Valentine, 2020. "Examining the Relationship between Earnings and Patent Filings among Pharmaceutical Companies in Asia," International Journal of Economics and Financial Issues, Econjournals, vol. 10(6), pages 217-221.
    12. Wojciech Chmielewski & Marta Postuła & Przemysław Dubel, 2023. "The Impact of Expenditure on Research and Development on Selected Energy Factors in the European Union," Energies, MDPI, vol. 16(8), pages 1-18, April.

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