New Perspectives on Impact of R&D on Corporate Profitability

Abstract

There is a significant ever-growing controversy about the role of R&D in the corporate decision-making structure for the US markets. R&D results have been found to be lack-luster creating erosion of trust in the value of R&D in American corporate world. This study sheds light on the relationship between R&D expenses and corporate profitability. It investigates the direct impact of R&D expenses across industries and found that the results were statistically significant. However, they were not consistent in the direction. The study suggest remedies in the current US accounting standards to properly account for measuring the impact of R&D expenses on corporate profitability. Capitalization of R&D expenses was suggested as an alternative method.