Proactive R&D management and information disclosure : ramifications for innovative chemicals companies

A common view is that investors view steady firm-level R&D investment as evidence of the firm's commitment to R&D-based innovation. However, recent research shows that R&D expenditure volatility is positively related to firm performance, suggesting that higher levels of...

Verfasser: Swift, Tim
Dokumenttypen:Artikel
Medientypen:Text
Erscheinungsdatum:2014
Publikation in MIAMI:12.03.2014
Datum der letzten Änderung:21.03.2016
Quelle:Journal of Business Chemistry, 11 (2014) 1, S. 15-32
Angaben zur Ausgabe:[Electronic ed.]
Fachgebiet (DDC):330: Wirtschaft
Lizenz:InC 1.0
Sprache:English
Anmerkungen:Section "Research Paper"
Format:PDF-Dokument
URN:urn:nbn:de:hbz:6-33399599303
Permalink:https://nbn-resolving.de/urn:nbn:de:hbz:6-33399599303
Onlinezugriff:2014_vol-11_iss1_15-32.pdf

A common view is that investors view steady firm-level R&D investment as evidence of the firm's commitment to R&D-based innovation. However, recent research shows that R&D expenditure volatility is positively related to firm performance, suggesting that higher levels of R&D expenditure volatility indicate effective governance of the R&D function. This paper shows that the relationship between R&D expenditure volatility and firm performance is stronger within firms that have higher levels of information asymmetry between the firm and its investors. This finding suggests that investors interpret R&D expenditure volatility as a good thing, and that this form of information takes on more significance in the absence of better sources of evidence. Innovative chemicals companies may reconsider conventional wisdom suggesting that consistent R&D expenditure conveys an emphasis on R&D-based innovation. Instead, firms can explain to investors that significant changes in R&D expenditure indicate that management is proactively managing R&D projects and combating R&D over investment.