Research and Development, Intangible Assets and the Performance of Large Australian Companies
Melbourne Institute Working Paper No. 02/98
Date: January 1998
Author(s):
Abstract
This paper analysis two basic questions concerning R&D and the performance of large Australian firms using data from the IBIS data base. First, what factors determine the extent of investment in R&D. Second, what impact does R&D have on the dynamic performance of Australian firms. A review of previous work on these questions is included. In analysing the first question, using a sample of up to 85 firms, we find that technological opportunity is a major determinant of R&D. In addition, it appears that firms which are less "focused" (in terms of diversification of activities) have lower R&D intensities. Firm size appears to have no relationship to R&D intensity. To investigate dynamic performance we use a Tobin q approach which seeks to explain the market value of firms. We find that intangible assets are an important determinant of market value. In particular, we find that contemporaneous R&D expenditure is positively linked to market value. The strength of this relationship depends on the exact sample used. Lastly, firms which have experienced relatively high levels volatility on market expenditure appear to have lower market values.