Abstract:

This paper studies the various factors that influence the R&D intensity in firms and the influence of each of these factors. It analyses if the financial slack, leverage and other financial factors impact the R&D outlay and the associated R&D intensity of these firms. Also, studied are the impacts of R&D intensity on the future performance of the firms in terms of sales, employment generated, profit margin etc. For this study, we have focused on the Drug and Pharmaceutical industry where R&D is a major competitive factor and firms specifically focus on R&D to create differentiation. We found that financial slack enabled higher R&D intensities which led to better revenue growth and employment in the following year but this effect progressively decreased over time.