RQ Innovative Efficiency and Firm Value
Cooper, Michael, Anne Marie Knott and Wenhao Yang, “RQ Innovative Efficiency and Firm Value” forthcoming, Journal of Financial and Quantitative Analysis
81 Pages Posted: 17 Jul 2015 Last revised: 2 Sep 2021
Date Written: July 1, 2020
We introduce and test a firm-level innovation-efficiency measure new to the finance literature. The measure, RQ, defined as the firm-specific output elasticity of R&D, was first developed in the management literature. RQ has low correlation with existing innovation input, output and efficiency measures. We test RQ in a number of innovation tests common to the finance literature and find that RQ is robust in all tests of firm value even after controlling for previous innovation measures. The results suggest that RQ may serve as a relevant complementary measure of a company’s innovation.
Keywords: Innovation, Research Quotient, Firm Value, Patents, Citations
JEL Classification: O31, O32, G12, G14
Suggested Citation: Suggested Citation