The persistency and volatility of the firm R&D investment: Revisited from the perspective of technological capability

摘要

The persistency and volatility of firm R&D investment has been a popular research subject for the R&D management field; however, previous research has found mixed evidence concerning the persistency and volatility of firm R&D investment. This paper empirically reveals the reason for the conflicting arguments among researchers by considering each firm's technological capability. The influence of technological capability on R&D investment differs depending on positive and negative shocks, and this influence can be the key to understanding heterogeneous R&D behavior across firms. The results show that technological capability amplifies the internal cash flow effect and cause volatility in R&D investment when sales increase over the sales of the previous year; positive shocks. However, technological capability offsets the internal cash flow effect and causes persistency in R&D investment when sales decreases from the sales of the previous year; negative shocks. These imply that R&D investment is not a dichotomous decision between persistency and volatility and is conditional on each firm's technological capability.