Determinants of Corporate R&D Investment: An Empirical Study Comparing Korea's IT Industry with Its Non-IT Industry

摘要

In our study, we extracted the market, finance, and government factors determining R&D investment of individual firms in the IT industry in Korea. We collected the financial data of 515 individual firms belonging to IT and non-IT industries between 1980 and 1999 from the Korea Investors Service's database and investigated the empirical relationship between the factors using an ordinary regression model, a fixed effects model, and a random effects model. The main findings of our study are as follows: ⅰ) The Herfindahl Index variable representing the degree of market concentration is statistically insignificant in explaining R&D expenditures in the IT manufacturing industry, ⅱ) Assets, which is used as a proxy variable for firm size, have a positive and statistically significant coefficient. These two results suggest that the Schumpeterian Hypothesis may be only partially applied to the IT manufacturing industry in Korea, ⅲ) The dividend variable has a negative value and is statistically significant, indicating that a tendency of high dividends can restrict the internal cash flow for R&D investment, ⅳ) The sales variable representing growth potential shows a positive coefficient, ⅴ) The subsidy as a proxy variable for governmental R&D promotion policies is positively correlated with R&D expenditure. This suggests that government policy has played a significant role in promoting R&D activities of IT firms in Korea since 1980. ⅵ) Using a dummy variable, we verified that firms reduced their R&D investments to secure sufficient liquidity under the restructuring pressure during Korea's 1998 and 1999 economic crisis.