The Impact of Business Life Cycle and Performance Discrepancy on R&D Expenditures-Evidence from Taiwan

Shu-Chin Chang, She-Chih Chiu and Pei-Cheng Wu

Accounting and Finance Research, 2017, vol. 6, issue 3, 135

Abstract: The purpose of this study is to examine the impact of business life cycle and performance discrepancy on Research and Development (R&D) expenditure. Specifically, we argue that managers of firms in different stages of business life cycle make R&D decisions according to their perception of performance discrepancy. We investigate three stages of business life cycle- growth stage, maturity stage, and stagnant stage. Based on a sample of firms listed in Taiwan Stock Exchange, we find that managers of firms in the growth stage tend to increase R&D expenditure when they experience positive performance discrepancy. This implies that growing firms’ slack-resource-driven behavior is leads to the increase in R&D expenditure. There is some evidence that managers of firms in the mature stage tend to increase R&D spending when they experience negative performance discrepancy, indicate that negative performance discrepancy triggers the problem-driven search behavior of managers of mature firms.

Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:jfr:afr111:v:6:y:2017:i:3:p:135

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