The Effects of Research and Development Expenditure on Firm Performance: an Examination of Pharmaceuticals Industry in Bangladesh

Jannatul Ferdaous, Mohammad Rahman
2017 Business & Entrepreneurship Journal   unpublished
The purpose of this study is to provide a comprehensive evaluation of firm performance against R&D expenditure. The issue of firm performance is measured within the purview of financial performance, market position performance, and market based performance. The data have been collected for the period of 2001-2015 from listed pharmaceuticals firms in stock exchanges of Bangladesh. This inductive research uses both pooled OLS regression analysis and panel data (fixed effect) estimation technique
more » ... timation technique for unbalanced panel data to measure, describe, and analyze the firm performance. After controlling some specific variables the present study finds significant positive non-linear relation between R&D expenditure and firm's financial performance, and R&D expenditure and firm's market position performance. However, a significant negative relation has found for the firm's market based performance against R&D expenditure. In other words, investors of Bangladesh do not consider R&D expenditure to be a creator of innovation rather they seem to be affected negatively in their assessment of the firm's financial condition by R&D expenditure. The study findings may provide useful guidance for entrepreneur, management for pharmaceuticals firms, and the general investors. The assessment of firm's performance against R&D expenditure can also be a useful source of information for the Bangladesh government's policy makers. JEL classification numbers: O32, L25, L65, C23