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

Lee, Myeong-Ho; Hwang, In-Jeong

doi:10.4218/etrij.03.0101.0401

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

ETRI journal, v.25 no.4, 2003년, pp.258 - 265

Lee, Myeong-Ho (Graduate School of Business in Information and Telecommunications, Myongji University) , Hwang, In-Jeong (Corporate Strategy Office, SKtelecom)

Abstract ▼ AI-Helper

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.

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가설 설정

Reynard [이 analyzed the correlation between R&D investment and profitability. He considered that the appropriateness from the success of R&D investment generally encourages firms to conduct R&D activities, but that excessive R&D expenditure can be a burden to firms because it cuts their profits. Thersfore, he agued that the optimal R&D investment be decided from the proportion of net profit to sales.
H1: The firm size is positively associated with R&D investment.
H2: The more concentrated the market is, the more R&D investment increases.
H3: As net profit increases, R&D investment increases.
H4: Firms with high dividend tendency restrict internal cash flow for R&D investment.
H5: Government subsidy promotes firms’ R&D investment.
H6: High growth potential is positively correlated with R&D investment.
. long-run expansion of total output, ” which inspired vast empirical studies focused on testing the following two hypotheses: i) innovation increases proportionately with firm size and ii) innovation increases with market concentration. However, empirical results on the Schumpeterian hypotheses are inconclusive, largely because investigators have failed to take systematic account of more fundamental sources of variation in the innovation behavior and performance of firms and industries [11].

제안 방법

The contributions of this paper are as follows: First, we investigate R&D determinants, including time effects, while previous studies mainly focused on cross section analysis within an industry in a specific year. Consequently, those previous studies just explained inter-firm differences in R&D, which is not sufficient to scrutinize the unexpected environmental factors induced by perturbation over time.
We postulate the following six hypotheses regarding firm size, market structure, internal funds, government policy, and growth potential, which were determined to be important determinants of R&D investment in the literature we surveyed.
In this study, we extracted the financial factors determining R&D investment of individual firms through literature reviews and tested those factors empirically. Even though our study comprehensively dealt with the determinants of R&D investment in the IT industry using panel data analysis, it has some limitations.

대상 데이터

In this paper, we selected 515 individual firms belonging to 23 manufacturing industries among all the firms listed on the Korea Stock Exchange. For homogeneity of the samples, firms whose fiscal year ended with the calendar year were selected.

성능/효과

ii) market concentration, internal fund, and long-term debt variables were statistically insignificant, ⅲ) the negative correlation between fixed asset investment and R&D investment was verified, ⅳ) the age of top management was statistically insignificant, while executives with engineering careers showed a more open attitude toward R&D investment, and v) firms whose representative director was a dominant shareholder invested less in R&D activity. Table 1 gives a summay of our literature review.
¹⁹⁾ We performed certain diagnostic tests to check the reliability of the estimates. Specifically, given the longitudinal nature of the data in this paper, we tested if panel regressions (fixed effects or random effects models) were more efficient than ordinary regression on the pooled data. We performed an 兄test on the restriction of equal intercepts at the group level and rejected this restriction for all specifications, 20) because the result suggested that it is appropriate to use either the fixed or random effects model instead of the ordinary regression model.
The empirical study in this paper suggests the following future research opportunities. First, since each industry has its own specific features, the empirical framework is limited. As we have shown, the fitness explained by adjusted-舟 is different from one industry to another.

참고문헌 (10)

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Scherer, F. M.. Research and Development Resource Allocation Under Rivalry. The Quarterly journal of economics, vol.81, no.3, 359-394.

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Connolly, Robert A., Hirschey, Mark. R & D, Market Structure and Profits: A Value-Based Approach. The review of economics and statistics, vol.66, no.4, 682-.

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Hyun, Tchang-Hee, Kim, Dong-Hwan. The Evolution of Korean Information Infrastructure and Its Future Direction: A System Dynamics Model. ETRI journal, vol.20, no.1, 1-15.

원문보기 상세보기
Fölster, Stefan. Do subsidies to cooperative R & D actually stimulate R & D investment and cooperation?. Research policy, vol.24, no.3, 403-417.

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Kallapur, Sanjay, Trombley, Mark A.. The Association Between Investment Opportunity Set Proxies and Realized Growth. Journal of business finance & accounting, vol.26, no.3, 505-519.

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Hoshi, Takeo, Kashyap, Anil, Scharfstein, David. Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups. The Quarterly journal of economics, vol.106, no.1, 33-60.

상세보기
Breusch, T. S., Pagan, A. R.. The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics. The Review of economic studies, vol.47, no.1, 239-253.

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DOI : 10.4218/etrij.03.0101.0401 [무료]
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