IDEAS home Printed from https://ideas.repec.org/a/taf/applec/45y2013i5p611-622.html
   My bibliography  Save this article

Diminishing marginal returns from R&D investment: evidence from manufacturing firms

Author

Listed:
  • Robert Faff
  • Yew-Kee Ho
  • Weiling Lin
  • Chee-Meng Yap

Abstract

This study analyses the association between R&D Investment (RDI) and growth opportunities and show that there exists diminishing marginal returns in manufacturing firms. Extant literature has found that besides R&D investment, systematic risk, financial leverage and complementary asset investment are also associated with growth opportunities. Accordingly, we employ structural equation modelling to simultaneously estimate both a direct influence of RDI as well as indirect influences of RDI on growth opportunities via these three mediating effects. We find that the direct effect of incremental RDI on growth opportunities is independent of R&D intensity. Instead, the heterogeneous effects of RDI on systematic risk, financial leverage and complementary asset investment across firms with different R&D intensity level accounts for the diminishing marginal returns to R&D investment. We specifically observe that the greatest indirect effect is via the financial leverage of the firm. This study shows the importance of accounting for the interdependencies in R&D investment.

Suggested Citation

  • Robert Faff & Yew-Kee Ho & Weiling Lin & Chee-Meng Yap, 2013. "Diminishing marginal returns from R&D investment: evidence from manufacturing firms," Applied Economics, Taylor & Francis Journals, vol. 45(5), pages 611-622, February.
  • Handle: RePEc:taf:applec:45:y:2013:i:5:p:611-622
    DOI: 10.1080/00036846.2011.608644
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00036846.2011.608644
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/00036846.2011.608644?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yuxin Li & Derek Bosworth, 2020. "R&D spillovers in a supply chain and productivity performance in British firms," The Journal of Technology Transfer, Springer, vol. 45(1), pages 177-204, February.
    2. Woo Sung Kim & Kunsu Park & Sang Hoon Lee & Hongyoung Kim, 2018. "R&D Investments and Firm Value: Evidence from China," Sustainability, MDPI, vol. 10(11), pages 1-17, November.
    3. Jan Lánský & Jiří Mihola & Petr Wawrosz, 2022. "Mathematical Modelling of Qualitative System Development," Mathematics, MDPI, vol. 10(15), pages 1-23, August.
    4. Timo Busch & Maximilian Schnippering, 2022. "Corporate social and financial performance: Revisiting the role of innovation," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(3), pages 635-645, May.
    5. Carlos Serrano-Cinca & Yolanda Fuertes-Call鮠 & Bego uti鲲ez-Nieto & Beatriz Cuellar-Fernᮤez, 2014. "Path modelling to bankruptcy: causes and symptoms of the banking crisis," Applied Economics, Taylor & Francis Journals, vol. 46(31), pages 3798-3811, November.
    6. Aiste Lastauskaite & Rytis Krusinskas, 2024. "The Impact of Production Digitalization Investments on European Companies’ Financial Performance," Economies, MDPI, vol. 12(6), pages 1-16, June.
    7. Cong Li & Minglai Li, 2020. "The Policy Information Gap and Resettlers’ Well-Being: Evidence from the Anti-Poverty Relocation and Resettlement Program in China," IJERPH, MDPI, vol. 17(8), pages 1-20, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:45:y:2013:i:5:p:611-622. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.