R&D-firm performance nexus: New evidence from NASDAQ listed firms

This paper examines the relationship between research and development (R&D) and firm performance for a collection of Nasdaq listed firms. We employ threshold models à la Hansen (1999) to test whether there is a nonlinear relationship between R&D and firm performance. We also investigate empirically the impact of the 2008 global financial crisis on the links between R&D and firm performance. Our results confirm the existence of threshold effects, suggesting that R&D and firm performance have a nonlinear relationship. We find that firms with high R&D intensity do not necessarily outperform those with low R&D intensity. Specifically, R&D exerts a positive influence on firm performance when it is below the estimated threshold value, whereas the impact becomes insignificant or even negative when it exceeds the estimated thresholds. Our results also suggest that the estimated threshold has since increased after the global financial crisis, so that the range of R&D that improves firm performance prior to the crisis is no more applicable post-crisis.