THE IMPACT OF RESEARCH AND DEVELEOPMENT ON REVENUE GENERATION AND INVESTMENT VALUATION OF INFO-TECH CORPORTIONS

Authors : Legima E. Doh, Damian R. Prince

Pages : 0-0

View : 14 | Download : 8

Publication Date : 2016-01-15

Article Type : Other

Abstract :In today’s rapidly changing business world, it has become imperative for companies to be innovative, in order to stay in business. At the heart of this approach is research and   development (R&D).  While, R&D practices differ across industries and companies, we recognize that the practice is prevalent in the pharmaceutical and the information technology (IT/ info-tech) industries. Despite the fact, that much research has been done on R&D in the pharmaceutical industry, there is limited literature and research on the subject in the information technology industry. Consequently, this study is our effort to assess the impact of R&D on revenue generation and investment valuation of IT corporations. In this study, we investigate the impact of R&D on revenue generation and investment valuation of 40 United States (U.S.) based information technology corporations. We find that info-tech companies that invest more on R&D generate more revenue. We also find that investors place higher value on corporations that invest larger parts of their revenues on R&D. This suggests that investors expect higher earnings growth in the future of companies that invest greater parts of their revenues on R&D.
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