Impact of research and development expenses on the profitability of assets: The case of textile and clothing industry in Portugal

Abstract

The study aims to examine the financial efficiency of the textile and clothing industries in Portugal using official statistical data. The main objective is to assess the relationship between spending on research and development and return on assets. The study analyzes the performance of various subsectors of the textile and clothing industries, presenting the relationship between investments in research and development and the operating return on assets over various economic periods. The study adopted data envelopment analysis, classifying decision-making units based on average efficiency levels. The results highlight sectors of manufacture of textiles for technical and industrial use, manufacture of other textiles, production of outerwear, and manufacture of workwear as the most efficient. In contrast, sectors of manufacture of clothing and accessories, manufacture of knitwear, and leather clothing show lower levels of efficiency. From 2003 to 2022, the textile industry exhibited the highest levels of financial efficiency, with an above-average ratio between spending on research and development and return on assets. However, sectors of knitwear manufacturing and textile finishing have maintained a more or less constant level of financial efficiency. The analysis highlights the need for targeted interventions to increase the financial efficiency of different subsectors within the textile and clothing industries. It is evident that there are varying levels of financial efficiency across these sectors, and the need for benchmarking periods can help identify areas for improvement and set achievable goals. AcknowledgmentThis article is financed by Instituto Politécnico de Setúbal [Polytechnic Institute of Setúbal].