Essays on investment activities for sustainable business performance and accounting effects

Abstract

A firm pursues continuous survival, growth, and financial profitability. If a company fails to secure competitiveness and adapt to changes in an environment of continuous technological development and social change, its survival is threatened. Therefore, companies pursue various efforts to respond to technological developments and social changes. In relation to sustainability, research has been conducted in various fields, such as economics, public administration, and engineering, as well as business administration, in various aspects of various members of our society, namely, individuals, companies, and the government. Various studies have been conducted on the sustainable business performance of firms, but these studies have mainly focused on accounting or financial performance. However, research that comprehensively considers investment activities in the private and public sectors for sustainable business performance under rapid technological and social changes is limited.This dissertation started from the point that, to achieve sustainable business performance, it is necessary to consider social change along with technological innovation to respond to technological change. For a company to achieve sustainable business performance, it is essential to secure technological competitiveness so that the firm can secure a comparative advantage compared to its competitors by thinking about technological change and innovation. However, as the interests of members of our society become diversified and various standards of value judgment are emerging, it is time to think about a firm’s sustainability beyond simply maximizing shareholder profits. In addition, there is a possibility of market failure

therefore, participation in the public sector is required. From these perspectives, this study examines the roles of the private and public sectors in sustainable business performance and suggests implications for mitigating market and government failures from the accouting effect perspectives.The first essay examines the factors that affect R&D investment and its persistence for sustainable business performance. For firm’s sustainability, R&D is a critical factor that should be maintained from a long-term perspective. Nevertheless, there is a phenomenon that the sustainability of R&D investment is undermined due to short-term fluctuations in revenues. The factors affecting R&D persistence were examined using the cost asymmetry model. The results showed that in the high-tech, high-value-added industries, the tendency was to maintain innovation capability through persistent R&D investment, even if sales revenue fluctuates, but in the low-tech area, the trend toward persistent R&D was not prominent. In addition, excessive competition negatively affects the persistence of R&D.The second essay examines the role of the public sector in sustainable business performance. If sustainability is left as an autonomous domain of the private sector, the possibility of market failure exists, and the government’s role is required to compensate for this. Fuel-cell electric vehicles (FCEVs) reflect social needs for eco-friendliness and are an innovative field with high potential in the energy and transportation field, which can contribute to sustainable business performance. However, FCEVs currently face difficulties due to their low economic feasibility and accessibility from the point of view of consumers. The importance of investment in the public sector for sustainability was examined through the factors affecting the distribution of FCEVs in Korea, which has the highest distribution rate and production capacity in the world. From the analysis, it was found that the government's interest in infrastructure, such as charging stations and environmental concerns, and the government's subsidy policy were important factors. Therefore, the role of the public sector and public investment, including infrastructure investment, is important for sustainable business performance.The third essay examines how direct and indirect investment in the public sector affects firms’ behavior. The state strives to encourage private firms to reflect on sustainability and social values through investment. As a result, it is confirmed that firms with state ownership show more downward asymmetric cost behavior. This can be seen as the aspect that needs for sustainability decrease the flexibility of the cost structure, but it can also be interpreted as the aspect of capitalization of social values in terms of sustainability that are not shown in the financial statements. In other words, it is interpreted that the participation of the public sector in equity leads firms in a direction that can reflect social values and plays a positive role in increasing social values as off-balance sheet assets. However, as there is also the aspect of government failure due to the agency problem that the public sector has, it also requires an institutional mechanism to alleviate these problems.This dissertation examines the efforts of the private and public sectors to achieve sustainable business performance in response to technological advancements and social changes, and what kind of effects they have from the accounting perspective. To respond to technological advances, firms must continue to invest in R&D, and the public sector, led by the government, is also paying attention to investment activities to prevent market failure, enhance sustainability, and manage the possibility of government failure.