NDLI: The effects of R&D and advertising on firm value: an examination of manufacturing and nonmanufacturing firms

Content Provider	IEEE Xplore Digital Library
Author	Yew Kee Ho Keh, H.T. Jin Mei Ong
Copyright Year	1988
Abstract	Firm spending on innovation and marketing, as measured by research and development (R&D) and advertising expenses, respectively, are expected to yield positive returns in terms of share price performance. Given resource limitations, firms prioritize the quantum of their investments in R&D and advertising vis-a/spl grave/-vis other investments. We examine the relationship between firm performance and the intensity of their investments in R&D and advertising over an extended period covering 40 years and 15 039 firm-years. Our findings are consistent with the resource-based literature. Specifically, we find that intensive investment in R&D contributes positively to the one-year stock market performances of manufacturing firms but not for nonmanufacturing firms. We also find that intensive investment in advertising contributes positively to the one-year stock market performances of nonmanufacturing firms. For the three-year stock market performance, in addition to the findings of the one-year period, we find inconclusive evidence that manufacturing firms benefit from investment in advertising. The interactions of R&D and advertising intensities are insignificant in explaining the stock market performance of the firms except for the three-year horizon for nonmanufacturing firms, which is significantly negative. Consistent with the resource-based literature, this implies that firm performances are diluted when they invest their resources in activities outside their core competence.
Sponsorship	IEEE Technology Management Council
Starting Page	3
Ending Page	14
Page Count	12
File Size	1124971
File Format	PDF
ISSN	00189391
Volume Number	52
Issue Number	1
Language	English
Publisher	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Publisher Date	2005-02-01
Publisher Place	U.S.A.
Access Restriction	One Nation One Subscription (ONOS)
Rights Holder	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Subject Keyword	resource-based view Advertising core competence firm performance interactions manufacturing market value nonlinear relationship nonmanufacturing research and development (R&D)
Content Type	Text
Resource Type	Article
Subject	Strategy and Management Electrical and Electronic Engineering

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