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The moderating role of firm age in the relationship between R&D expenditure and financial performance: evidence from Chinese and US mining firms

Rafiq, Shudhasattwa, Salim, Ruhul and Smyth, Russell 2016, The moderating role of firm age in the relationship between R&D expenditure and financial performance: evidence from Chinese and US mining firms, Economic modelling, vol. 56, pp. 122-132, doi: 10.1016/j.econmod.2016.04.003.

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Title The moderating role of firm age in the relationship between R&D expenditure and financial performance: evidence from Chinese and US mining firms
Author(s) Rafiq, ShudhasattwaORCID iD for Rafiq, Shudhasattwa orcid.org/0000-0002-2109-7441
Salim, Ruhul
Smyth, Russell
Journal name Economic modelling
Volume number 56
Start page 122
End page 132
Total pages 11
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2016-08
ISSN 1873-6122
Summary We examine the impact of Research and Development (R&D) on the profitability and sales of mining firms in China and the United States (US) and the moderating effect of firm age using Coarsened Exact Matching (CEM). For the combined panel of 168 major US and Chinese mining firms, we find that, on average, a firm engaging in R&D activities earns 4% to 11% higher sales and generates 4% to 13% more profits than firms that do not engage in R&D activities. We also show that, in the mining industry, firm age moderates the relationship between R&D activities and financial performance. A comparatively mature R&D active firm earns 4.4% more profit and generates 7.2% more sales than a younger non-innovative firm. The turning point at which R&D activities switch from making a negative, to positive, contribution to profit and sales is 37 years and 22 years, respectively. Our results are consistentwith the liability of newness, meaning that firm investment in R&D takes time to have a real impact on bottom line measures of financial performance. We conclude with a discussion of the practical implications of our results for Chinese and US mining firms.
Language eng
DOI 10.1016/j.econmod.2016.04.003
Field of Research 140209 Industry Economics and Industrial Organisation
140205 Environment and Resource Economics
140301 Cross-Sectional Analysis
Socio Economic Objective 850101 Coal Exploration
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2016, Elsevier
Persistent URL http://hdl.handle.net/10536/DRO/DU:30082942

Document type: Journal Article
Collection: Department of Economics
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