Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/317602 
Year of Publication: 
2022
Citation: 
[Journal:] Journal of Business Economics and Management (JBEM) [ISSN:] 2029-4433 [Volume:] 23 [Issue:] 5 [Year:] 2022 [Pages:] 1234-1256
Publisher: 
Vilnius Gediminas Technical University, Vilnius
Abstract: 
Corporate management is often accused of short-term oriented behaviour related to R&D expenditures. This study analyses the influence of R&D volatility and R&D intensity on the market capitalization of pharmaceutical and medical research companies from Europe, considering the institutional context and several firm characteristics. Panel regression estimations on a sample of 217 companies for 2014-2019 indicate that R&D volatility adversely affects market value. The analysis is conducted on the entire sample and on sub-samples determined based on the positive and negative values of the R&D volatility. This differentiates between the continuous and the disrupting effect of R&D activities and the firm's shift between exploratory and exploitative innovations. The positive volatility sub-sample provides consistent evidence of a significant negative influence of the R&D volatility on the market value. For the negative volatility sub-sample, R&D intensity and its interaction with R&D volatility have a significant positive effect, consistent over the alternative estimations. We conclude that the market influence of the R&D expenditure is related to the sign of volatility and depends on the proportion of R&D expenditure, especially when the volatility is negative. Our findings provide valuable insights for managers, investors, analysts, and other stakeholders about the market reaction to R&D volatility.
Subjects: 
R&D volatility
R&D intensity
market value
positive volatility
negative volatility
corporate management
JEL: 
O32
E22
M21
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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