Exploring the Relationship between R&D Investment and Business Performance—An Empirical Analysis of Chinese ICT SMEs

Service and product innovation have been emphasized as being essential to the success of ICT firms in numerous studies. Being ongoing processes, R&D activities make it challenging to forecast the benefits to a business. Does the company obtain immediate returns on its research and development ex...

Full description

Saved in:
Bibliographic Details
Published in:Sustainability 2023-03, Vol.15 (6), p.5142
Main Authors: He, Mengning, Estébanez, Raquel Pérez
Format: Article
Language:English
Subjects:
Annual reports
Coronaviruses
Corporate growth
Correlation
COVID-19
Data collection
Dependent variables
Economic aspects
Economics
Educational aspects
Expenditures
Finance
Financial performance
Hypotheses
Independent variables
Industrial research
Information technology
Investments
Liquidity
Market value
R&D
Research & development
Research & development expenditures
Small and medium sized companies
Small business
Spain
Success
Technology application
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Service and product innovation have been emphasized as being essential to the success of ICT firms in numerous studies. Being ongoing processes, R&D activities make it challenging to forecast the benefits to a business. Does the company obtain immediate returns on its research and development expenditures? How long will their effectiveness remain? During the development of a strategy, business managers must take all these factors into account. A major objective of this paper is to determine the relationship between a company’s R&D investment and its business performance. We collected data from 1262 small- and medium-sized enterprises in the ICT service industry in China between 2011 and 2020. The R&D investment was selected as the independent variable, while its financial performance (ROA, ROE, liquidity ratio, debt asset ratio, and interest cover ratio) and market value (Tobins’ Q) were selected as the dependent variables. Multiple linear regressions were used to determine whether there was a correlation between these variables. Firstly, R&D investment improve current profitability and there is a one-period lag in these benefits. Second, R&D is negatively correlated with short-term debt-paying ability, but positively correlated with a long-term view, and these effects will last for one period. Lastly, R&D investment has a negative impact on the current market value, but the R&D investment within the two lagged periods still has a positive impact. This study addresses a significant gap in empirical research. Recommendations for companies to consider when making R&D decisions are also included in the paper.
ISSN:2071-1050
2071-1050
DOI:10.3390/su15065142