Please use this identifier to cite or link to this item: https://doi.org/10.1109/TEM.2004.839943
Title: The effects of R&D and advertising on firm value: An examination of manufacturing and nonmanufacturing firms
Authors: Ho, Y.K. 
Keh, H.T.
Ong, J.M.
Keywords: Advertising
Core competence
Firm performance
Interactions
Manufacturing
Market value
Nonlinear relationship
Nonmanufacturing
Research and development (R&D)
Resource-based view
Issue Date: 2005
Source: Ho, Y.K., Keh, H.T., Ong, J.M. (2005). The effects of R&D and advertising on firm value: An examination of manufacturing and nonmanufacturing firms. IEEE Transactions on Engineering Management 52 (1) : 3-14. ScholarBank@NUS Repository. https://doi.org/10.1109/TEM.2004.839943
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-à-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 15039 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. © 2005 IEEE.
Source Title: IEEE Transactions on Engineering Management
URI: http://scholarbank.nus.edu.sg/handle/10635/44490
ISSN: 00189391
DOI: 10.1109/TEM.2004.839943
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