An Empirical Test of Endogenous Firm Growth

Knott, Anne Marie; Vieregger, Carl

doi:10.2139/ssrn.2382885

Cited by 7 publications

(7 citation statements)

References 16 publications

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“…Their study, however, differs in that their focus is on the role of firm size in the relationship between leverage and firm performance. Knott and Vieregger (2018) is another related study. They develop a model linking R&D to the market value of firms.…”

Section: Introductionmentioning

confidence: 99%

Do large firms benefit more from R&D investment?

Ibhagui¹

2019

EurJ Appl Econ

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We examine the importance of firm size in the relationship between research & development (R&D) and firm performance. Our empirical analysis, based on data drawn from Nasdaq-listed companies for the period 2002 to 2017, shows that R&D can have effects of varying magnitudes on firm performance, depending on firm size. When R&D weakens firm performance, the negative effects are more pronounced for small-sized firms, but when the impact of R&D is positive, leading to an improvement in firm performance from increased R&D, largesized firms tend to reap most of the benefits. Accordingly, we show that firm size matters in understanding the scale of the impact of R&D on firm performance.

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Section: Introductionmentioning

confidence: 99%

Do large firms benefit more from R&D investment?

Ibhagui¹

2019

EurJ Appl Econ

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“…Perhaps most importantly, RQ is a reasonable empirical proxy for theoretical innovation constructs. For example, studies such as Knott and Vieregger (2014), indicate that RQ matches empirical predictions of firm R&D investment, firm value and growth from endogenous growth theory (Thompson 1996, Lentz andMortensen 2008 an additional input into equation 2 of firm-specific spillovers (S it ) which is computed as the sum of the differences in knowledge between focal firm i and rival firm j for all firms in the four digit SIC industry with more knowledge (R&D) than the focal firm:…”

Section: Research Quotient (Rq)mentioning

confidence: 79%

“…Random coefficients (RC) estimation inherently accounts for stable firm-specific shocks through the firm-specific error term on each input. Tests conducted elsewhere (Knott and Vieregger 2014) of RC versus IV approaches to solving the simultaneity problem indicate that RC yields more precise and reliable coefficient estimates for inputs than these other approaches.…”

Section: Functional Form Of Randd Inputmentioning

confidence: 98%

Measuring Innovation

Cooper¹,

Knott²,

Yang³

2015

SSRN Journal

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Innovation is vital to firm value. Accordingly a number of recent papers in the finance literature have begun examining the impact of governance and other firm measures on innovation. To date these papers have used patent-based measures to capture innovation. However such measures ignore the greater than 50% of firms who do R&D but don't patent their innovations. To address that concern, we examine the feasibility of using a more universal measure of innovation -the firm's research quotient (RQ), defined as the firm-specific output elasticity of R&D. We show that RQ is more strongly associated with firm value than previous patent-based measures. Given RQ's universality advantages and stronger relation with firm value relative to patents, we propose using RQ in future studies of innovation.

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“…Thus, it can be applied to any firm which engages in R&D. Moreover, the unitless characteristic of RQ make RQ become uniform measurement in interpreting across firms either within the same industry or across industries. Endogenous growth theory (Knott & Vieregger, 2014) proposes that RQ empirically can be a proxy for firm R&D investment, firm value and growth.…”

Section: Research Quotient (Rq)mentioning

confidence: 99%

The Impact of Options Trading on the Relationship between Research Quotient and Firm Performance

Huang¹,

Irawan²

2017

IJEF

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The performance of innovation could be counted by the number of patent. Patent information enables a firm to estimate R&D efficiency and stock market value. Nonetheless, patents is not universal because more than 50% companies in COMPUSTAT do not patent their new products. Since patents have some drawbacks, Cooper, Knott, and Yang (2015) use Research Quotient (RQ) as an indicator of firm innovation because RQ measures the productivity of the R&D department, which produces a new innovative product and transforms it into revenues. In this paper, we examine the impact of option trading on the relation between RQ and stock market return (or firm value). We find that RQ has the positive impact on firm value, proxy by market-to-book (MTB) value. The option dummy, which is the firm with option trading, has significantly positive impact on the relation between RQ and firm value and insignificantly positive impact on the relation between RQ and future stock return. Nonetheless, interaction term of RQ and option volume has positive and significant impacts on MTB and future stock return.

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An Empirical Test of Endogenous Firm Growth

Cited by 7 publications

References 16 publications

Do large firms benefit more from R&D investment?

Do large firms benefit more from R&D investment?

Measuring Innovation

The Impact of Options Trading on the Relationship between Research Quotient and Firm Performance

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