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R&D intensity, firm performance and the identification of the threshold: fresh evidence from the panel threshold regression model

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This article tests whether there is an optimal level of research and development (R&D) intensity at which point a firm is able to maximize its performance. An advanced panel threshold regression model is employed to investigate the panel threshold effect of R&D intensity on firm performance among publicly traded Taiwan information technology and electronic firms. The results confirm that a single-threshold effect does exist and show an inverted-U correlation between R&D intensity and firm performance. This article demonstrates that it is possible to identify the definitive level beyond which a further increase in R&D expenditure does not yield proportional rewards. Some important policy implications emerge from the findings.

Document Type: Research Article


Affiliations: 1: Department of Business Administration, National Chung Hsing University, Taichung, Taiwan 2: Department of Business Administration, National Chung Hsing University, Taichung, Taiwan,Department of Business Administration, Ling Tung University, Taichung, Taiwan 3: Department of International Business Studies, National Chi Nan University, Nantou, Taiwan

Publication date: February 1, 2010

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