The firm’s investment opportunity set (IOS) reflects the prospective growth opportunities and associated payoff distributions related to physical and human capital investments. IOSs are largely firm specific, embedded in assets-in-place, or generated by experience curves, learning-by-doing, and other similar phenomena. However, the value of an IOS can be destroyed if a firm does not exercise the option to invest. In this study, we theorize that a firm’s ability to invest in R&D is conditional on the availability of a favorable IOS. We test our theoretical propositions in the European business environment using a sample of 832 publicly traded firms with concentrated ownership over the period 2002-2011. Our findings support the notion that the IOS is a significant determinant of corporate R&D investments, but the magnitude of this effect depends on the identity of the ultimate owner. Specifically, the sensitivity of R&D investments of family- and state-owned corporations is higher to the IOS than that of widely held corporations, suggesting these firms are more responsive to their IOS than others.
Investment Opportunities and R&D Investments in Family and Nonfamily Firms.
Roberto barontini;Ivan Miroshnychenko
2018-01-01
Abstract
The firm’s investment opportunity set (IOS) reflects the prospective growth opportunities and associated payoff distributions related to physical and human capital investments. IOSs are largely firm specific, embedded in assets-in-place, or generated by experience curves, learning-by-doing, and other similar phenomena. However, the value of an IOS can be destroyed if a firm does not exercise the option to invest. In this study, we theorize that a firm’s ability to invest in R&D is conditional on the availability of a favorable IOS. We test our theoretical propositions in the European business environment using a sample of 832 publicly traded firms with concentrated ownership over the period 2002-2011. Our findings support the notion that the IOS is a significant determinant of corporate R&D investments, but the magnitude of this effect depends on the identity of the ultimate owner. Specifically, the sensitivity of R&D investments of family- and state-owned corporations is higher to the IOS than that of widely held corporations, suggesting these firms are more responsive to their IOS than others.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
