How Do Firm Characteristics Influence the Relationship Between R&D and Firm Value?

Valdoceu de Queiroz, Julio Pindado and Chabela de la Torre (chabela@usal.es)
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Valdoceu de Queiroz: Ministerio de Hacienda de Brasil
Chabela de la Torre: Departamento de Administraci¢n y Econom¡a de la Empresa, Facultad de Econom¡a y Empresa, Universidad de Salamanca, http://web.usal.es/~chabela/

No 2006-09, Working Papers "New Trends on Business Administration". Documentos de Trabajo "Nuevas Tendencias en Dirección de Empresas". from Interuniversity Research Master and Doctorate Program (with a quality mention of ANECA) on "Business Economics", Universities of Valladolid, Burgos, Salamanca and León (Spain). Until 2008, Interuniversity Doctorate Program (with a quality mention of ANECA) “New trends in Business Administration”, Universities of Valladolid, Burgos, and Salamanca (Spain). Master en Investigación y Programa de Doctorado Interuniversitarios (con mención de calidad de la ANECA) en "Economía de la Empresa", Universidades de Valladolid, Burgos, Salamanca y León (España). Hasta 2008, Programa de Doctorado Interuniversitario (con mención de calidad de la ANECA) “Nuevas Tendencias en Dirección de Empresas”, Universidades de Valladolid, Burgos y Salamanca (España).

Abstract: This paper focuses on how a firm?s characteristics affect the market valuation of its research and development (R&D) spending. We derive a valuation model based on the capital market arbitrage condition. The estimation of this model by using the Generalized Method of Moments and data from the eurozone countries yields interesting results. Several firm characteristics (namely, size, firm growth and market share) are found to positively affect the relationship between firm value and R&D spending, while others (specifically, free cash flow, dependence on external finance, labour intensity and capital intensity) exert a negative effect. Therefore, the effectiveness of the R&D spending depends on the firm characteristics.

Keywords: Research and development; valuation model; firm characteristics. (search for similar items in EconPapers)
JEL-codes: G30 O32 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2006-12
New Economics Papers: this item is included in nep-cse and nep-ino
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Journal Article: How Do Firm Characteristics Influence the Relationship between R&D and Firm Value? (2010)
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