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Are Returns to R&D in the Global Services Industry Impervious to Business Environment Turbulence?

Su, Yiyi and Rao-Nicholson, Rekha and Fan, Di and Li, Rui (2021) 'Are Returns to R&D in the Global Services Industry Impervious to Business Environment Turbulence?' Academy of Management Discoveries. ISSN 2168-1007

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Abstract

We investigate firm, industry and country variations in changes of returns to R&D after the global financial crisis in the global services industry. To conduct this exploratory work, we use a large panel data sample of 11,635 company-years from 82 countries for the period 2003-2013. We find that services firms, after the crisis, (1) can derive better returns from R&D, and (2) the changing returns to R&D could be contingent on firm-specific idiosyncrasies, general industrial environments, and national institutional quality. Our results find support in both the exogenous shock model and Schumpeterian theories, but only to an extent, thus demonstrating the need for further theorization on the influence of R&D on a firm’s performance in the post-crisis period. We address the question of whether returns to R&D in the services industry are impervious to business environment turbulence. We find that they are not, though persistence in R&D, contingent on the firm, industry, and country-level factors, could be crucial for their performance. Notably, low market share, high leverage, stability in the services sub-industries, and sound national institutional quality might be important to derive returns from innovative activities.

Item Type: Article
Uncontrolled Keywords: global financial crisis; R&D; growth; services industry; cross-country differences; industry effects
Divisions: Faculty of Social Sciences > Essex Business School
Depositing User: Elements
Date Deposited: 11 Jan 2021 10:34
Last Modified: 12 Mar 2021 14:15
URI: http://repository.essex.ac.uk/id/eprint/29495

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