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R&D Spillover Effects and Firm Performance Following R&D Increases

Published online by Cambridge University Press:  29 November 2013

Sheng-Syan Chen ,
Yan-Shing Chen ,
Woan-lih Liang  and
Yanzhi Wang
Sheng-Syan Chen
Affiliation:
sschenfn@ntu.edu.tw, College of Management, National Taiwan University, No 1, Sec 4, Roosevelt Rd, Taipei, Taiwan
Yan-Shing Chen
Affiliation:
yanshing@ntu.edu.tw, College of Management, National Taiwan University, No 1, Sec 4, Roosevelt Rd, Taipei, Taiwan
Woan-lih Liang
Affiliation:
wlliang@nctu.edu.tw, Graduate Institute of Finance, National Chiao Tung University, 1001 University Rd, Hsinchu, Taiwan.
Yanzhi Wang
Affiliation:
yzwang@ntu.edu.tw, College of Management, National Taiwan University, No 1, Sec 4, Roosevelt Rd, Taipei, Taiwan
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Abstract

We examine how research and development (R&D) incoming spillovers affect long-run firm performance following firms’ R&D increases. We use a stochastic frontier production method to capture R&D incoming spillover effects. Firms reaping more benefits from R&D investment made by other firms experience more improvement in profitability and more favorable long-run stock performance in the post-R&D-increase period. Firms with higher levels of R&D incoming spillovers recruit more key employees from other firms, suggesting that obtaining know-how through hiring is an important source of incoming spillovers. The evidence also shows that firms experiencing more R&D outgoing spillover effects tend to underinvest in R&D.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 48 , Issue 5 , October 2013 , pp. 1607 - 1634
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2013 

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