Investment in Research Development or Size Expansion? The Case of Internet of Things Companies

摘要

The Internet of Things (IoT) is at the height of its hype cycle and one can argue that the IoT construct will subsume housing, infrastructures, industrial plants, and other systems in the near future. Big data that is associated with IoT could control systems, affect automation and the process industries require R&D support to shape the concept into a functional asset that resolves the problems of users. Hence, investment in research and development (R&D) as an integral part of any IoT project could be the first step towards project success. The objective of this study is to examine the effects of an investment in R&D and size expansion on the firm value of the top Internet of Things companies. This study examines the top 20 Internet of Things companies in the world spanning the period from 2012 to 2019. By using the panel regression random effect model, this study yields two main conclusions. First, the expansion of size by the companies has a significant impact on promoting the firm value. Second, investment in R&D is negatively associated with the firm value of the IoT companies at the initial stage but the lag effect of investment in R&D is associated positively with the firm value. The significant size expansion impact on the firm value in the IoT firms suggests that the agile size could lead to more efficient use of resources and easy identification of growth opportunities. The second conclusion demonstrates the need for a budget allocation for the investment in R&D for the technological progression and scientific advancement in the IoT companies. Although it takes a few years to observe the significant impacts of investment in R&D on IoT firms, in the long term, it could improve the performance of IoT companies in driving the proliferation of connected devices to enhance human productivity and efficiency.