Partial adjustment toward target R&D intensity

Yan Chen

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

Existing research assumes that once firms have determined their target R&D intensity, they can adjust instantaneously and fully to their target R&D intensity, regardless of their past R&D intensity. In this study, we draw on the partial adjustment framework to examine the dynamics of firms' adjustment toward their target R&D intensity. We find that firms usually do not adjust instantaneously or fully to their target R&D intensity; they typically close half of the gap between their past and target R&D intensity in a year. Furthermore, we find that the speed of adjustment varies widely across firms. Firms with more cash flows, less debt, and more new equity financing have higher speed of adjustment. We draw implications for the dynamics of R&D investments and Schumpeterian competition.

Original languageEnglish
Pages (from-to)591-602
Number of pages12
JournalR and D Management
Volume48
Issue number5
DOIs
StatePublished - Nov 2018

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