When tough get going: Performance of R&D in the adverse economic conditions

Di Fan, Rekha Rao-Nicholson, Yiyi Su

Research output: Contribution to journalArticle

Abstract

How does economic adversity change firms' returns from R&D investments? Economic adversity is argued to limit firms' R&D investments due to financial constraints, yet, conversely, create opportunities for firms to discover novel approaches and potentially increase R&D. To deal with this challenge, firms should assess their organizational adaptability and rigidity in order to make a strategic choice. However, what boundary conditions trigger firms’ strategic choice remains unsolved. Embracing a strategic choice perspective, we investigate the links between economic adversity, R&D and performance across the firm-specific factors in the context of the 2008 global economic crisis. Our empirical analysis adopts a sample of 10,888 firms with an unbalanced panel of 40,599 firm-year observations from 65 countries for the period 2003–2013. We find that, under economic adversity, those firms with either lower market share, a larger number of employees or more physical assets are likely to enjoy a higher level of returns to R&D investments. That is, these firm-specific factors can more likely help firms form organizational adaptability in adverse economic conditions.
Original languageEnglish
Number of pages40
JournalLong Range Planning
DOIs
Publication statusE-pub ahead of print - 12 Jan 2019

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