Choice of R&D strategy and asymmetric cost behaviour

Abstract

This study investigates the effect of corporate R&D investment on the asymmetric behaviour of SG&A costs. Managers decide how much resources to invest in R&D, based on the strategic objectives of the company. We found that if more resources are invested in R&D, the company reserves more resources when sales decrease. Additionally, we distinguished capitalised R&D from expensed R&D to demonstrate that the effect on SG&A cost behaviour is different according to disclosure policies. This will help in understanding the decision-making process which is dependent on the management's motivation or perception of R&D investment.