TY - JOUR
T1 - The effects of R&D and competition on firm value
T2 - International evidence
AU - Gupta, Kartick
AU - Banerjee, Rajabrata
AU - Onur, Ilke
PY - 2017/9
Y1 - 2017/9
N2 - Using a new comprehensive database of 75 countries spanning 2004–2013, we examine the joint effects of research and development (R&D) intensity and competition on the value-creation of a firm. We introduce country-specific institutional characteristics related to institutional quality, R&D infrastructure and training and test whether these variations change the effect of R&D intensity on firm value. Moreover, we calculate the marginal effect of R&D intensity on firm value for high and low-income countries separately, based on different degrees of competition. Our findings suggest that in developing countries the positive effect of R&D intensity on the market valuation of a firm exists primarily for firms in less competitive industries. In developed countries, however, the positive effect of R&D intensity on Tobin's Q is evident for all competition levels. The results are empirically robust after controlling for potential endogeneity and employing alternative country-level attributes. Our findings have strong policy implications based on differences in R&D related investments made by firms in developing and developed countries.
AB - Using a new comprehensive database of 75 countries spanning 2004–2013, we examine the joint effects of research and development (R&D) intensity and competition on the value-creation of a firm. We introduce country-specific institutional characteristics related to institutional quality, R&D infrastructure and training and test whether these variations change the effect of R&D intensity on firm value. Moreover, we calculate the marginal effect of R&D intensity on firm value for high and low-income countries separately, based on different degrees of competition. Our findings suggest that in developing countries the positive effect of R&D intensity on the market valuation of a firm exists primarily for firms in less competitive industries. In developed countries, however, the positive effect of R&D intensity on Tobin's Q is evident for all competition levels. The results are empirically robust after controlling for potential endogeneity and employing alternative country-level attributes. Our findings have strong policy implications based on differences in R&D related investments made by firms in developing and developed countries.
KW - Competition
KW - Institutions
KW - R&D
KW - Tobin's Q
UR - http://www.scopus.com/inward/record.url?scp=85021959821&partnerID=8YFLogxK
U2 - 10.1016/j.iref.2017.07.003
DO - 10.1016/j.iref.2017.07.003
M3 - Article
AN - SCOPUS:85021959821
SN - 1059-0560
VL - 51
SP - 391
EP - 404
JO - International Review of Economics and Finance
JF - International Review of Economics and Finance
ER -
