Studies on the effect of R&D investment on the performance of government and company

Abstract

Research and Development (R&D) investment plays an important role in enhancing the innovation capabilities of countries and companies and strengthening technological competitiveness. For this reason, many countries and companies are actively investing in R&D, but it is not easy to achieve the desired results. With the increase of the government R&D budget, the issue of R&D investment efficiency is constantly being presented, but there are many limitations in revealing the success factors of the project due to the characteristics of R&D activities. In addition, in a situation where social responsibility management based on ESG is becoming an important issue more than ever, the analysis of the synergy effect between corporate R&D investment and ESG management is insufficient and does not provide a clear answer. This paper has great significance in that it presents implications for improving R&D investment efficiency through empirical analysis of R&D investment performance and synergy effects, which are currently an issue for the Korean government and companies. In the first essay, we analyzed how professional autonomy (PA) and project commitment (PC) affect R&D investment efficiency through a study on the impact on R&D performance at the national R&D level. Countries with low technology levels have narrowed the technological gap with developed countries through continuous and strategic R&D investment. However, inefficient R&D with low performance is among the chronic problems of these countries. While factors such as budget, manpower, and operational process influence R&D innovation output (IO), the autonomous R&D climate and commitment in projects are also essential. This study analyzes the effects of PA and PC on the performance of 1,063 government-funded R&D projects in Korea. Our results indicate that PA improves R&D IO in the research planning stage. Additionally, PC has a negative effect on R&D IO, but there are positive moderating effects between both large firm involvement and project duration and R&D performance. This study has a great academic contribution in that it newly defined the variables of autonomy and commitment and verified their effects on government R&D performance. In other words, PA and PC were measured through the data obtained in the R&D planning and execution process rather than the traditional survey method. In addition, this study on research autonomy and commitment presents policy implications for improving the efficiency of R&D projects in countries that are transitioning from catching up to leading in R&D. In the second essay, we investigated the relationship between ESG management performance, which has recently become a hot topic in corporate management, and R&D investment and corporate financial performance (CFP). Environmental, social, and governance (ESG) management has become essential for corporations to grow sustainably at a time when climate change, environmental protection, human rights, and transparent management have become important global issues. However, research findings on the impact of ESG management on CFP are inconsistent, and not many studies have been conducted on Asia and developing countries that plan to introduce ESG management. In addition, although R&D investment has a great influence on ESG management, few studies have focused on the relationship between R&D investment, ESG management, and CFP. This study analyses the effect of ESG performance on the return on assets (ROA) by using panel data combining ESG rating and financial data of Korean companies and whether R&D investment has a moderating effect between ESG performance and ROA. We obtained the following results. First, ESG performance has a negative effect on CFP while there is no statistically significant effect in heavily polluting industries (HPI). Second, R&D investment has no significance on CFP, but a positive moderating effect exists between environmental (E) and social (S) performance and CFP. ESG management could be a stepping stone for the sustainable growth of companies if it promotes active ESG management from a mid-to-long-term perspective and creates synergy between R&D investment and ESG activities. In this study, we could not confirm the positive effect of ESG management on CFP. However, from a mid-to-long-term perspective, if a company can actively promote ESG management and draw synergies between R&D investment and ESG activities, then ESG management can be a stepping stone for a firm's sustainable growth.