| Summary: | 碩士 === 國立中正大學 === 會計與資訊科技研究所 === 104 === This study examines whether the increase in R&D and advertising affects firm performance during an economic downturn and which strategy (i.e., increasing both R&D and advertising or increasing either one) helps firms survive an economic downturn. The cumulative effect of R&D and advertising is also addressed in this study.
Firm performance, in this study, includes operating performance (i.e., operating margin, return on assets, and return on equity) and market performance (i.e., Tobin’s Q). To further explore the cumulative lag effect of R&D and advertising, the incremental investment is dug into in terms of long term (5 years) and short term (3 years). Additionally, taking the changing economic condition into account, this study analyzes the sample drawn from fiscal years during the economic boom to generate applicable strategies of R&D and advertising investment.
The empirical results show that the increase in R&D and the accumulation of R&D positively affect firm performance while the increase in advertising and the accumulation of advertising only positively affect market performance in the short run. In comparison, R&D increase has more positive effect on firm performance than that of advertising. Besides, firms investing in both R&D and advertising outperform those investing in only R&D or advertising. Therefore, increasing R&D, coupled with advertising investment, is conducive to boosting performance and managing an economic downturn. Firms with short-term financial needs or with needs of market performance improvement may consider increasing advertising to stimulate the market.
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