Firm Characteristics, Uncertainty and Research and Development (R&D) Investment: The Role of Size and Innovation Capacity

• Main Authors: Sungmoon Jung, Gihyun Kwak
• Format: Article
• Language: English
• Published: MDPI AG 2018-05-01
• Series: Sustainability
• Subjects: R& D investment; firm size; firm innovation capacity; dynamic panel data analysis
• Online Access: http://www.mdpi.com/2071-1050/10/5/1668

This paper examines the investment behavior of research and development (R&D) under uncertainty. We assume that there is a heterogeneous effect of uncertainty on R&D investment depending on characteristics of a firm. According to the results, the size and the innovation capacity of a firm are found to positively moderate the negative relationship between uncertainty and R&D investment. When the entire sample is divided into large and small-and-medium enterprises and high innovation capacity and low innovation capacity, it is found that the innovation capacity of a firm is a more crucial factor in positively moderating the negative relationship between R&D investment and uncertainty than the size of a firm. These findings provide policy implications, particularly for small-and-medium enterprises (SMEs), to promote R&D activities.