| dc.description.abstract | In a modern society with ever-changing technologies, greater elasticity of consumer demand, products with shortened life cycles, the business environment and industrial structure shift rapidly. In order to keep up with the times and maintain products competitiveness, companies will have incentives to invest in research and development activities (Research & Development, R&D), which are expected to stimulate product innovation momentum and reach sustainable operation. Especially, due to the digital revolution in the development of information and communication technology, R&D is particularly important to the high-tech industry. It can not only reduce costs by improving product manufacturing processes, but also achieve products innovation by strengthening core technologies. If successfully transforms R&D investment into substant products, it can be expected to increase stock price or corporate value, and will also be reflected into business performance.
In order to understand the impact of R&D investment on business performance, this study uses manufacturing companies in Taiwan listed on the OTC from 2002 to 2019 as the research object. Considering the differences in enterprise scale and industry Specifics, R&D Intensity (ratio of R&D expenditure and revenue) is used as an indicator of R&D investment, and business performance is measured by return on assets (ROA), return on equity (ROE), Tobin′s Q and gross profit margin. In view of the fact that different sample sources, model constructions, etc. will lead to different empirical conclusions, the relevant literature has not yet reached a consensus on whether R&D investment can efficiently achieve innovation or increase corporate value, and creat expected economic benefits. In addition to analyzing the overall situation of listed companies in Taiwan′s manufacturing industry, this study also distinguishes different sub-sectors in the manufacturing industry into individual discussions, which may provide a more comprehensive view of the impact of R&D activities on business performance in different sector.
First, this study uses the least square method (OLS) to study the correlation between R&D of overall manufacturing industry and its performance. The empirical results found that R&D intensity is significantly negatively correlated with ROA and ROE, and significantly positively correlated with Tobin’s Q and gross profit margin. Further, this study explores the different sub-industry situations in the manufacturing industry, and found that the impact of R&D intensity on the business performance of the manufacturing industry varies from sectorto sector. Finally, using a fixed-effect model to control the unobservable characteristics of individual companies that don’t change over time, it was found that the R&D intensity of manufacturers is significantly negatively correlated with ROA, ROE, and Tobin’s Q, and significantly positively correlated with gross profit margin. If we analyze the electronics industry listed on the Taiwan stock market or the OTC market with a fixed-effect model, consistent empirical results can be obtained.
The above results derive the following conclusions: R&D investment does not necessarily have a positive impact on technology-intensive industries such as the chemical industry, biotechnology, medical care, and electronics. To observe the current situation of Taiwan’s industry, the high-tech electronics industry tends to be foundry which is only a part of the production chain and replaced rapidly. If the company attaches too much to R&D investment, it may not help improve business performance, and even cause crowding-out effects on production resources. Therefore, it is recommended that companies should not blindly conduct research and development activities for maintaining product advantages, resulting in inefficient allocation of resources.
Keywords: R&D intensity, business performance, manufacturing | en_US |