R&D investment, firm performance and the moderating role of systems and safeguards : evidence from emerging markets

Alam, MA; Uddin, MM; Yazdifar, H; Shafique, S; Lartey, T

Abstract

The relationship between R&D and firm performance is highly dependent on the external environment. Therefore, this paper examined the effects of country level investor protection (safeguards) and governance mechanisms (systems) on the relationship between R&D and firm performance. Using GMM estimation and elasticity testing of panel data for 423 firms from 12 emerging countries, we find that a country’s safeguards tend to moderate the relationship between R&D and firm performance more than the system of a country. The results indicate that safeguarding is relatively more important for the relationship between R&D and firm performance than other country level governance mechanisms, as the former can easily attract outside capital when it is strong. These results have significant implications for innovation policy. In particular, managers may wish to strengthen investor protection to promote high R&D investment in order to increase firm performance.

• Journal Article Type: Article
• Acceptance Date: Sep 7, 2019
• Online Publication Date: Sep 26, 2019
• Publication Date: Jan 1, 2020
• Deposit Date: Sep 11, 2019
• Publicly Available Date: Mar 26, 2021
• Journal: Journal of Business Research
• Print ISSN: 0148-2963
• Publisher: Elsevier
• Volume: 106
• Pages: 94-105
• DOI: https://doi.org/10.1016/j.jbusres.2019.09.018
• Publisher URL: https://doi.org/10.1016/j.jbusres.2019.09.018
• Related Public URLs: https://www.journals.elsevier.com/journal-of-business-research