Scale effects of R&D as reflected in earnings and returns

Mustafa Ciftci and William M. Cready

Journal of Accounting and Economics, 2011, vol. 52, issue 1, 62-80

Abstract: Using returns to scale as a conceptual foundation, we explore how R&D-related earnings performance and earnings variability depend upon firm size. We find that the positive association between the level of future earnings and R&D intensity increases with firm size, and that the positive association between the volatility of future earnings and R&D intensity decreases with firm size, consistent with R&D productivity increasing with scale. We also show that R&D scale is associated with lower market returns, consistent with the idea that R&D investment risk declines with scale.

Keywords: Returns; to; scale; Research; and; development; Profitability; Return; size; effect (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (42)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:52:y:2011:i:1:p:62-80

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