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

Di Fan, Rekha Rao-Nicholson, Yiyi Su

Research output: Contribution to journalArticlepeer-review

12 Citations (Scopus)

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
Article number101867
Number of pages40
JournalLong Range Planning
Volume53
Issue number3
Early online date12 Jan 2019
DOIs
Publication statusPublished - Jun 2020

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