Untying the Relationship Between R&D and Firm’s Performance: A Mediation Analysis of BSE Listed Companies in India
Parole chiave
R&D expenditure, firm performance, capital structure, mediating effect, GMMAbstract
This study reveals the capital structure as a moderating effect between R&D Expenditure and firm performance. Capital structure is a major part of a business enterprise that ensures the financial funding for innovation and brings new products to the market. Return on assets (ROA), return on equity (ROE), and return on capital (ROCE) are taken as dependent variables. The authors computed R&D Intensity from the ratio of R&D Expenditure and total sales, which was considered as an independent variable. Firm Size and capital structure are considered as control variables and mediating variables. Also, this study shows an adverse outcome of R&D Intensity on firm performance using pooled-OLS, fixed-effect, random-effect, and dynamic panel regression for a sample of BSE100 firms for the 2015-2024 to 2023-24 periods. The insight of the study is valuable for the management, policymakers, investors, and government who are interested in R&D Expenditure and in understanding the relationship between R&D Intensity and firm performance.
Riferimenti bibliografici
Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277–297. https://doi.org/10.2307/2297968.
Ayaydın, H., & Karaaslan, İ. (2014). The effect of research and development investment on firms’ financial performance: Evidence from manufacturing firms in Turkey. Bilgi Ekonomisi ve Yönetimi Dergisi, 9(2), 43–59.
Bae, S.C., & Noh, S. (2001). Multinational corporations versus domestic corporations: A comparative study of R&D investment activities. Journal of Multinational Financial Management, 11(1), 89–104. https://doi.org/10.1016/S1042-444X(00)00044-X.
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120. https://doi.org/10.1177/014920639101700108.
Chakraborty, B. (2023). Does board structure and ownership structure influence the performance of listed companies? Evidence from pharmaceuticals and chemical industry of Bangladesh. Copernican Journal of Finance & Accounting, 12(1), 29–45. https://doi.org/10.12775/CJFA.2023.002.
Chen, S., Chen, Y., Liang, W., & Wang, Y. (2019). Public R&D spending and cross-sectional stock returns. Research Policy, 49(1), 103887. https://doi.org/10.1016/j.respol.2019.103887.
Ehie, I.C., & Olibe, K. (2010). The effect of R&D investment on firm value: An examination of US manufacturing and service industries. International Journal of Production Economics, 128(1), 127–135. https://doi.org/10.1016/j.ijpe.2010.06.005.
Erdogan, M., & Yamaltdinova, A. (2019). A Panel Study of the Impact of R&D on Financial Performance: Evidence from an Emerging Market. Procedia Computer Science, 158, 541–545. https://doi.org/10.1016/j.procs.2019.09.087.
Freihat, A.R.F., & Kanakriyah, R. (2017). Impact of R&D expenditure on financial performance: Jordanian evidence. European Journal of Business and Management, 9(32), 73–83.
Ho, Y. K., Tjahjapranata, M., & Yap, C. M. (2006). Size, leverage, concentration, and R&D investment in generating growth opportunities. The Journal of Business, 79(2), 851–876. https://doi.org/10.1086/499140.
Jensen, M.C., & Meckling, W.H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X.
Jiraporn, P., Chintrakarn, P., & Liu, Y. (2011). Capital structure, CEO dominance, and corporate performance. Journal of Financial Services Research, 42(3), 139–158. https://doi.org/10.1007/s10693-011-0109-8.
Johannessen, J. (2008). Organisational innovation as part of knowledge management. International Journal of Information Management, 28(5), 403–412. https://doi.org/10.1016/j.ijinfomgt.2008.04.007.
Kaushik, A., Basha, B.Ch., & Ganesan, L. (2020). Science Technology and Innovation (STI) Policies in India: a Flashback, Science Policy Forum.
Kim, S.K., Lee, B.G., Park, B.S., & Oh, K.S. (2011). The effect of R&D, technology commercialization capabilities and innovation performance. Technological and Economic Development of Economy, 17(4), 563–578. https://doi.org/10.3846/20294913.2011.603481.
Lantz, J.-S., & Sahut, J.-M. (2005). R&D investment and the financial performance of technological firms. International Journal of Business, 10(3), 251–270.
Lin, B., Lee, Y., & Hung, S. (2006). R&D intensity and commercialization orientation effects on financial performance. Journal of Business Research, 59(6), 679–685. https://doi.org/10.1016/j.jbusres.2006.01.002.
Lioui, A., & Sharma, Z. (2012). Environmental corporate social responsibility and financial performance: Disentangling direct and indirect effects. Ecological Economics, 78, 100-111. https://doi.org/10.1016/j.ecolecon.2012.04.004.
Margaritis, D., & Psillaki, M. (2009). Capital structure, equity ownership and firm performance. Journal of Banking & Finance, 34(3), 621–632. https://doi.org/10.1016/j.jbankfin.2009.08.023.
Matheson, D., & Matheson, J. (1998). The smart organization: Creating value through strategic R&D. Harvard Business School Press.
Modigliani, F., & Miller, M.H. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 48(3), 261–297.
O’Brien, J. P. (2003). The capital structure implications of pursuing a strategy of innovation. Strategic Management Journal, 24(5), 415–431. https://doi.org/10.1002/smj.308.
Resende, S., Monje-Amor, A., & Calvo, N. (2024). The effect of enterprise risk management on firm performance: the mediating role of research and development investment. International Journal of Innovation Management, 28(05n06). https://doi.org/10.1142/s1363919624500233.
Son, S. C., & Zo, H. (2023). Do R&D resources affect open innovation strategies in SMEs? Technology Analysis & Strategic Management, 35(11), 1385–1397. https://doi.org/10.1080/09537325.2022.2047024.
Teirlinck, P. (2017). Configurations of strategic R&D decisions and financial performance in small- and medium-sized firms. Journal of Business Research, 74, 55–65. https://doi.org/10.1016/j.jbusres.2017.01.008.
Wu, D., Wang, S., Chang, S., Lian, G., & Chen, Y. (2022). Comparison of external R&D and internal R&D: Based on the perspective of S&T development of China’s pharmaceutical manufacturing industry. PLoS ONE, 17(6), e0270271. https://doi.org/10.1371/journal.pone.0270271.
Wu, Z., Chua, J.H., & Chrisman, J.J. (2006). Effects of family ownership and management on small business equity financing. Journal of Business Venturing, 22(6), 875–895. https://doi.org/10.1016/j.jbusvent.2006.07.002.
Pubblicato
Come citare
Fascicolo
Sezione
Licenza
Copyright (c) 2026 Biki Digar, Brajaballav Pal, Sanjib Das
Questo lavoro è fornito con la licenza Creative Commons Attribuzione - Non opere derivate 4.0 Internazionale.
Stats
Number of views and downloads: 0
Number of citations: 0
