Does Investment in R&D Affect Firm Reputation: Indian Experience

Abstract

Reputation has been widely accepted as a surreptitious resource which is imperative for organisations to imbibe. Despite its recognition as a clandestine to success, its formation is arduous. It takes lot of effort on the part of corporate managers to identify and indulge into reputation-building activities. Several researchers have found that good corporate governance, socially responsible acts and financial performance lead to good reputation, but the role of research and development (R&D) activities in enhancing firm reputation has garnered less attention till date. The current study is novel as it examines the relevance of expenditure made on R&D activities in an emerging economy like India, where hardly any study has directly deciphered the relation between R&D activities and corporate reputation. The study analyses the impact of R&D activities undertaken by top 500 Indian companies on their reputation which is measured by market capitalisation. The results of multivariate regression analysis of cross-sectional data reveal that the amount spent on R&D activities can be viewed as an investment as it generates a significant positive impact on firm reputation. The findings suggest that stakeholders view R&D-intensive firms favourably.