R&D productivity: an exploratory international study

Abstract

Purpose

The objective of this exploratory paper is to investigate the impact of R&D expenditures on company performance. R&D activities play an essential role in the future economic development and financial performance of firms.

Design/methodology/approach

The research design is based on an earnings equation associating earnings with recorded assets, R&D expenditures and selling, general and administrative expenses (proxying for advertising expenses). The paper determines a rate of return on R&D for each given sample of firms in six developed countries.

Findings

The results corroborate previous studies of American companies, which found that reported earnings, adjusted for expensing of R&D, reflect realized benefits from R&D. This study provides further evidence on the positive contribution of R&D activities to future company performance, although this contribution can vary from one country to another.

Research limitations/implications

Being exploratory in nature, this paper suggests several areas for investigation.

Originality/value

With the exception of some American studies, the economic effectiveness of investment in R&D is seldom demonstrated explicitly by the literature, and to the best of our knowledge, there are no existing studies on R&D productivity taking an international approach.

Citation

Ding, Y., Stolowy, H. and Tenenhaus, M. (2007), "R&D productivity: an exploratory international study", Review of Accounting and Finance, Vol. 6 No. 1, pp. 86-101. https://doi.org/10.1108/14757700710725476