ISSN : 2287-1608
This paper empirically investigates the role of R&D intensity on market concentration of firms using four key market valuation variables, namely (1) market share, (2) labor intensity, (3) firm age and, (4) firm’s market value. The empirical tests use database at firm level for the Indian IT sector from 1999 to 2013 from the CMIE Prowess database. The results of the regression analyses partially support our hypothesis that R&D intensity positively influences firm’s market value measure by the H-index. The test results are consistent with the hypotheses that R&D spending is more valuable for firms with larger market shares, higher labor intensity, and firms that are diversified.
Aghion, P. and Howitt, P. (1992) A model of growth through creative destruction, Econometrica, 60, 323-351.
Baumol, M. (2001) The Free-Market Innovation Machine, Princeton.
Bond, S., Harhofff, D. and Reenen, J.V. (2006) Investment, R&D and financial constraints in Britain and Germany, Annalesd’ Economieet de Statistique, 79(80), 435-462.
Brown, J.R., Martinsson, G. and Petersen, B.C. (2012) Do financing constraints matter for R&D? European Economic Review, 56, 1512-1529.
Chan, S., Martin, J. and Kensinger, J. (1990) Corporate research and development expenditures and share value, Journal of Financial Economics, 26(2), 255-276.
Chen, M., Cheng, S.J. and Hwang, Y. (2005) An empirical investigation of the relationship between intellectual capital and firms’ market value and financial performance, Journal of Intellectual Capital, 6(2), 159-175.
Dutta, S., Narashimhan, O. and Rajiv, S. (1999) Success in high-technology markets: is marketing capability critical? Journal of Marketing Science, 18(4), 547-568.
Easton, P. and Zmijewski, M. (1989) Cross-sectional variation in the stock market response to the announcement of accounting earnings, Journal of Accounting and Economics, 11, 117-141.
Gopalakrishnan, S. and Damanpour, F. (1997) A review of innovation research in economics, Sociology and Technology Management, Omega, 25(1), 15-28.
Hirschey, M., Richardson, V.J. and Scholz, S. (2001) Value relevance of non-financial information: the case of patent data, Review of Quantitative Finance and Accounting, 17(3), 223-235.
Ho, Y.K., Keh, H.T. and Ong, J.M. (2005) The effects of R&D and advertising on firm value: an examination of manufacturing and non-manufacturing firms, IEEE Transactions of Engineering Management, 52(1), 3-14.
Holthausen, R., Larcker, D. and Sloan, R. (1995) Business unit innovation and the structure of executive compensation, Journal of Accounting and Economics, 19, 279-313.
Hottenrott, H. and Peters, B. (2012) Innovative capability and financing constraints for innovation: more money, more innovation? Review of Economics and Statistics, 94(4), 1126-1142.
Hubbard, R.G. (1998) Capital-market imperfections and investment, Journal of Economic Literature, 36(1), 193-225.
Kotabe, M., Srinivasan, S.S. and Aulakh, P.S. (2002) Multinationality and firm performance: the moderating role of R&D and marketing capabilities, Journal of International Business Studies, 33(1), 79-97.
Lau, R.S.M. (1998) How does research and development intensity affect business performance? South Dakota Business Review, 57(1), 1-8.
Lin, B., Lee, Y. and Hung, S. (2006) R&D intensity and commercialization orientation effects on financial performance, Journal of Business Research, 59(6), 679-685.
Petri, F., and Elgar, E. (2004) Tobin’s Q: general equilibrium, Capital and Macroeconomics, Massachusetts, USA: Edward Elgar Publishing Inc.
Quo, B., Wang, Q.Z. and Shou, Y.Y. (2004) Firm size, R&D, and performance: an empirical analysis on software industry in China, Proceedings of IEEE International Engineering Management Conference, 613-616
Ross, S.A., Westerfield, R.W. and Jordan, B.D. (1993) Fundamentals of Corporate of Finance, 2nd ed., Homewood, IL: Irwin Press
Schumpeter, J. (1912) The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle, translated from the Germany by Redvers Opie (1961), New York: OUP.
Singh, M. and Faircloth, S. (2005) The impact of corporate debt on long term investment and firm performance, Applied Economics, 37, 875-883.
Stiglitz, J.E. and Weiss, A. (1981) Credit rationing in markets with imperfect information, American Economic Review, 71, 393-410.
Stiglitz, J.E. (1989) Financial markets and development, Oxford Review of Economic Policy, 5(4), 55-68.
Tobin, J. (1969) A general equilibrium approach to monetary theory, Journal of Money, Credit and Banking, 1(1), 15-29.
Wolfe, R.V. (1994) Organizational innovation: review, critique and suggested research directions, Journal of Management Studies, 31(3), 211-230.