R&D, productivity, and market value: An empirical study from high-technology firms

Although prior research has addressed the influence of production activity and research and development (R&D) on productivity, it is not clear whether production and R&D affect the market value of a firm. This study proposes and verifies an R&D value chain framework to explore the relationship among productivity, R&D, and firm market values, as measured by Tobin's q theory. By doing so, we attempt to link new theoretical insights and empirical evidence on the effects of R&D efforts and basic production activities to the market valuations of high-technology firms. The value chain data envelopment analysis approach was proposed to estimate parallel-serial processes of basic operations and R&D efforts. This approach can be used to simultaneously estimate the profitability efficiency and marketability efficiency of high-technology firms. This area has rarely been studied, but it is particularly important for high-technology R&D policies and for further industrial development. Using the R&D value chain perspectives of model innovations and extensions proposed in several previous studies, we examined the appropriate levels of intermediate outputs. Production efficiency and R&D were combined to estimate the appropriate levels of intermediate outputs for high-technology firms. Based on the intermediate output analyses, we developed an R&D efforts decision matrix to explore and identify operational and R&D efficiency for high-technology firms. Our sample firms are displayed on a four-quadrant action grid that provides visual information on current short-term operational efficiency and decision making on long-term R&D strategic positions. The empirical findings from the R&D value chain model can provide information for policymakers and managers and suggest the adoption of various policies that place more emphasis on profitability and marketability strategies. Crown Copyright (C) 2012 Published by Elsevier Ltd. All rights reserved.