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Regular version of the site

Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Aleksey Mikhaylov
R&D Investment and Financial Outcomes in Corporate Segment
Economics
(Bachelor’s programme)
2018
Although the Research and Development spendings topic is becoming more and more popular nowadays due to digitalisation period, its influence on the corporate segment is still ambiguous. The goal of the proposed research is to statistically determine the relationship between R&D and economic performance measured by such metrics as EBITDA, EBITDA margin, Sales growth, Return on Invested Capital, Return on Equity and Tobin's Q. The key features of our research are cross-industry and region aspects, extended list of dependent variables (we have added investment and market metrics) and usage of panel data. We have used panel data for 6 years with virtually 25 thousand observations from different industries (Energy, Healthcare, IT, Industrial goods, Basic goods) and regions (North America, Europe, Asia). Our independent parameters defined as R&D investment in singular, quadratic and cubic forms, second year lag of R&D and group of control variables: quantity of Full-Time Employees, Industry, Region and Year effects. We have used econometrics models for panel data, namely Fixed Effects, Random Effects and First Difference to account for individual heterogeneity. Fixed Effects model have been used as a basis for our identification strategy. As a result, we have proved positive impact on key metrics in a non-linear cubic form. Second year lag on R&D investment makes significant impact on key metrics which states long-term characteristic of such investment. Finally, we have found out that optimal level of R&D intensity is approximately 2-2,5% of key metric. Our results could be generalized only to firms with public ownership structure within observable industries and regions. Our findings will also be practical for professionals in consulting and investment analysis spheres.

Keywords: research and development, R&D spending, firm economic performance, EBITDA, EBITDA margin, Sales growth, ROIC, ROE, Tobin's Q, panel data, identification strategy, fixed effects, random effects

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