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Strategic control systems and relative r&d investment in large multiproduct firms

Strategic control systems and relative r&d investment in large multiproduct firms This paper hypothesizes that tight financial controls associated with large diversified M‐form firms lead to a short‐term, low‐risk orientation and thereby lower relative investment in R&D. Further, it is hypothesized that increasing levels of diversification require different control systems which have significant implications for investing in R&D. Results of the study of 124 major U.S. firms suggest that less diversified U‐form firms invest more heavily in R&D than more diversified M‐form firms after controlling for size and industry effects. Additionally, dominant business firms invested more in R&D than either related or unrelated business firms. Finally, the relationship between R&D intensity and market performance was negative for related and unrelated firms. The findings suggest that the market evaluates R&D investment more positively for firms that are organized to seek synergy than for those that are organized to pursue a hedging (or diversification) strategy. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Strategic Management Journal Wiley

Strategic control systems and relative r&d investment in large multiproduct firms

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Publisher
Wiley
Copyright
Copyright © 1988 John Wiley & Sons, Ltd.
ISSN
0143-2095
eISSN
1097-0266
DOI
10.1002/smj.4250090607
Publisher site
See Article on Publisher Site

Abstract

This paper hypothesizes that tight financial controls associated with large diversified M‐form firms lead to a short‐term, low‐risk orientation and thereby lower relative investment in R&D. Further, it is hypothesized that increasing levels of diversification require different control systems which have significant implications for investing in R&D. Results of the study of 124 major U.S. firms suggest that less diversified U‐form firms invest more heavily in R&D than more diversified M‐form firms after controlling for size and industry effects. Additionally, dominant business firms invested more in R&D than either related or unrelated business firms. Finally, the relationship between R&D intensity and market performance was negative for related and unrelated firms. The findings suggest that the market evaluates R&D investment more positively for firms that are organized to seek synergy than for those that are organized to pursue a hedging (or diversification) strategy.

Journal

Strategic Management JournalWiley

Published: Nov 1, 1988

References

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