What R&D Assets Say about Firm Profitability

Pierluigi Santosuosso

International Business Research, 2016, vol. 9, issue 6, 64-71

Abstract: Research and development (R&D) activities are usually considered a key factor for achieving superior performances. Using a sample of 11,897 manufacturing Italian firms, we examine the relationship between R&D expenditure that is capitalized as an intangible asset and some proxies of firm profitability over a period of four years in order to explore whether R&D assets can help investors in the identification of profitable firms. Contrary to expectations, this paper found a negative and/or an insignificant association between R&D assets and proxies of firm profitability. Although there are several possible explanations for this result, what we learn from this study is that R&D assets are not on average a reliable indicator for detecting profitable firms. Research findings revealed that firms with R&D assets appear to be not so profitable, large and levered.

Keywords: research and development; intangible assets; firm profitability; Italian firms (search for similar items in EconPapers)
Date: 2016
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