Is R&D Always Beneficial?

Abstract

This study sets out with the aim of determining whether there is such a thing as an optimal level of research and development (R&D) intensity within which a firm can effectively maximize its sales growth ratio. We adopt an advanced panel threshold regression model to examine the relationship between R&D intensity and the growth rate in sales based upon data on firms within the electronics industry in Taiwan. The results demonstrate that R&D intensity has a positive impact on sales growth when the level of such R&D intensity is below the threshold value, and a negative impact when the level of R&D intensity is above the threshold value.