Group affiliation, R&D and firm performance: empirical evidence from Indian manufacturing sector Online publication date: Tue, 01-Dec-2015
by Dinesh Jaisinghani
International Journal of Business and Emerging Markets (IJBEM), Vol. 8, No. 1, 2016
Abstract: The purpose of the current study is to compare the performance of firms affiliated to business groups with that of independent (stand-alone) firms in the Indian context. Specifically, the study tries to find out the differences in research and development (R&D) intensity, between the two categories of firms, and its impact on profitability. The analysis has been carried out for firms from three industries in the Indian manufacturing sector. The time period considered is from 2004 to 2013. The findings reveal that group-affiliated firms generally overspend on R&D activities. This spending, however, does not translate into higher profitability. The panel data analysis also shows that there exist a nonlinear relationship between R&D intensity and profitability. Thus, it can be concluded that group firms, which overspend on R&D activities generally do not perform as efficiently as the stand-alone firms. Therefore, firms affiliated to business groups should reconsider their R&D strategy in order to enhance their profitability.
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