Impact of Profitability, R&D Intensity, and Cash Flow on R&D Expenditure in Pharmaceutical Companies
13 Pages Posted: 5 May 2011
Date Written: April 29, 2011
This paper empirically examines the influence of the determinants of R&D expenditure, such as firm’s lagged profitability, R&D intensity, and cash flow on R&D expenditure of the pharmaceutical companies. All of them have an important roles in determining the steps of the corporate strategy to investing in R&D activities. The data used in this study was gathered from six large pharmaceutical companies in the U.S., in the period of 2003 to 2010. The result shows that firm’s lag profitability, R&D intensity, and cash flow have the positive influence and affect significantly the firms amount R&D expenditure in the pharmaceutical companies. Thus, enhancement in the firm’s one-year lagged profitability, R&D intensity, and cash flow can increase firm’s amount of R&D expenditure.
Keywords: Research and Development Expenditure, Profitability, R&D Intensity, Cash Flow
JEL Classification: I11, L21, L65, O30
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