Chapter 5: Empirical results
5.3 Robustness test
5.3.2 Time-lagged effect analysis
Existing cross-sectional analyses that neglect the lagged effects of R&D cooperation intensity, R&D investments, and R&D outputs on financial performance may be problematic. Lin and Chen (2005) state that short-term economics measures are unable to reflect the influence of corporate R&D strategy if empirical data are cross sectional and limited within a short time of period. They indicate that the impact of R&D on economics measures often has a time-lag of more than 2 years. Ernst (2001) also argues that patent applications lead to sales increases with a time-lag of 2 to 3 years. Therefore, I apply path analysis to further test the lagged effects of R&D cooperation on R&D investments, R&D outputs, and financial performance during the period of 2002 (t+1) - 2004 (t+3). The models are as follows:
Model 1: Regressing Profitt+1~t+3 on R&D cooperation intensity:
ε
* significant at the 10% level; ** significant at the 5% level; *** significant at the 1% level.
0.08
Model 2: Regressing R&D investmentt+1~t+3 on R&D cooperation intensity:
Model 3: Regressing R&D outputt+1~t+3 on R&D cooperation intensity and R&D investment:
Model 4: Regressing Profitt+1~t+3 on R&D investment:
ε
Model 5: Regressing Profitt+1~t+3 on R&D output:
ε
Model 6: Regressing Profitt+1~t+3 on R&D cooperation intensity and R&D investment:
ε
Model 7: Regressing Profitt+1~t+3 on R&D cooperation intensity and R&D output:
Model 8: Regressing Profitt+1~t+3 on R&D cooperation intensity, R&D investment, and R&D output:
ε
Table 22, 23 and 24 provide the results of path analysis with the time-lagged effect of R&D cooperation intensity, R&D investments, and R&D outputs on financial performance. The coefficients on R&D cooperation are all positive and significant for all lagged effect models (Model 1, 2, and 3). Thus H5a, H5b, and H5c are further supported. R&D output still has a positive impact on profit for all Model 5, while R&D investment has no direct effect on Profit in all Model 4. Therefore, H7b is supported, but H7a is not. Once I control for the effect of R&D outputs on financial performance, the coefficients of R&D cooperation intensity on profit becomes much smaller in all lagged effect model (The coefficient of R&D cooperation intensity is decreased from 0.206 in Model 1 to 0.069 in Model 7 for one-year lagged model, t=54.5390, p<0.01; 0.245 to 0.124 for two-year lagged model, t=51.5443, p<0.01;
0.274 to 0.222 for three-year lagged model, t=21.7458, t<0.01). Therefore, these results again support H8b’s prediction that the effect of R&D cooperation on financial performance is mediated by R&D outputs. However, the coefficients of R&D cooperation intensity still remain unchanged or even become larger (The coefficient of R&D cooperation intensity is changed from 0.206 in Model 1 to 0.203 in Model 6
for one-year lagged model, t=0.7769, p=0.4374; 0.245 to 0.249 for two-year lagged model; 0.274 to 0.278 for three-year lagged model) after controlling for the effect of R&D investments on financial performance. Hence, H8a is not supported which indicate that the impact of R&D cooperation intensity on financial performance is not mediated by R&D investments. This justifies that R&D outputs explain a larger portion of performance than R&D investments and are a superior leading indicator of future financial performance (e.g. Jaffe 1986; Narin and Noma 1987; Deng et al. 1997;
Werner and Souder 1997; Ernst 2001; Hirschey et al 2001; Cukier 2005; Hall et al.
2005; Scotchmer 2005; Tsai and Wang 2005). See Figures 8, 9, and 10 for the time-lagged path between R&D cooperation intensity, R&D investments, R&D outputs, and financial performance.
Table 22: The path analysis between R&D cooperation intensity, R&D investments, R&D outputs, and financial performance (One-year lagged model)
Model 1 Model 2 Model 3
Dependent variable:
Profit2002
Dependent variable:
R&D investment2002
Dependent variable:
R&D output2002
Independent variables: Coef. t-value Coef. t-value Coef. t-value R&D cooperation
intensity .2055718 4.30*** .1416735 3.02*** .2236149 4.40***
R&D investment2001 .030042 0.67
R&D output2001
Capital structure2002 .1040717 2.74*** -.0145913 -0.39 .0518743 1.29 Sales growth2002 -.1312972 -3.35*** -.1755982 -4.57*** -.0011948 -0.03 Firm size2002 .2901122 5.80*** .2580936 5.26*** .1594957 2.95***
Upstream -.0268653 -0.59 .0559293 1.25 .0030101 0.06
Midstream -.0483916 -1.06 .1894584 4.24*** .0484638 0.99
Optoelectronics .0681345 1.35 -.0053953 -0.11 -.0456653 -0.86 Telecommunications .1194649 2.52** -.0616865 -1.33 -.0333532 -0.66 Computer component .2036955 3.47*** -.2586809 -4.49*** .0568963 0.90 Computer peripheral .2362288 4.28*** -.038519 -0.71 -.0110956 -0.19 System and equipment .1308065 2.60*** -.0630689 -1.28 .0071531 0.13
N 591 591 591
Adj. R2 0.2160 0.2456 0.1273
Note: * significant at the 10% level; ** significant at the 5% level; *** significant at the 1% level.
Table 22: The path analysis between R&D cooperation intensity, R&D investments, R&D outputs, and financial performance (One-year lagged model) (cont.)
Model 4 Model 5 Model 6 Model 7 Model 8
Dependent variable:
Profit2002
Dependent variable:
R&D investment2002
Dependent variable:
Profit2002
Dependent variable:
Profit2002
Dependent variable:
Profit2002
Independent variables: Coef. t-value Coef. t-value Coef. t-value Coef. t-value Coef. t-value R&D cooperation intensity .2034012 4.22*** .0689908 1.83* .0693557 1.83*
R&D investment2001 .0376029 0.88 .0153209 0.36 -.0026878 -0.08
R&D output2001 .6096806 20.28*** .5993785 19.64*** .5994482 19.62***
Capital structure2002 .0989571 2.57*** .0708274 2.40** .1042953 2.75*** .0732421 2.49** .0731993 2.48**
Sales growth2002 -.1422334 -3.53*** -.1331897 -4.40*** -.1286069 -3.22*** -.1274192 -4.20*** -.1278907 -4.14***
Firm size2002 .4090182 9.56*** .2309465 7.19*** .286158 5.58*** .1898665 4.85*** .1905486 4.76***
Upstream -.0076681 -0.17 -.022636 -0.64 -.0277222 -0.61 -.0296766 -0.84 -.0295266 -0.83 Midstream -.0450113 -0.96 -.0779131 -2.20** -.0512942 -1.11 -.0808512 -2.29** -.0803458 -2.24**
Optoelectronics .0494268 0.97 .0897809 2.30** .0682171 1.35 .0956024 2.45** .0955911 2.44**
Telecommunications .121789 2.52** .1409311 3.82*** .12041 2.53** .1405669 3.82*** .1404035 3.81***
Computer component .1755073 2.92*** .1611264 3.58*** .2076587 3.48*** .1742511 3.83*** .1735524 3.74***
Computer peripheral .221781 3.97*** .2384087 5.58*** .236819 4.29*** .2435728 5.70*** .2434702 5.69***
System and equipment .1334258 2.61*** .127683 3.27*** .1317728 2.61*** .1276547 3.27*** .1274848 3.26***
N 591 591 591 591 591
Adj. R2 0.1921 0.5271 0.2162 0.5298 0.5298
Note: * significant at the 10% level; ** significant at the 5% level; *** significant at the 1% level.
Table 23: The path analysis between R&D cooperation intensity, R&D investments, R&D outputs, and financial performance (Two-year lagged model)
Model 1 Model 2 Model 3
Dependent variable:
Profit2003
Dependent variable:
R&D investment2003
Dependent variable:
R&D output2003
Independent variables: Coef. t-value Coef. t-value Coef. t-value
R&D cooperation
intensity .2451476 5.47*** .1605468 3.43*** .2058905 4.09***
R&D investment2001 .0344372 0.78
R&D output2001
Capital structure2003 .0804072 2.28** .125414 3.40*** .0051657 0.13 Sales growth2003 -.1354655 -3.73*** -.1810908 -4.77*** .0061384 0.15 Firm size2003 .3634683 7.74*** .1976471 4.02*** .2222172 4.20***
Upstream -.0204757 -0.48 .0346766 0.78 .002035 0.04
Midstream -.0347794 -0.82 .1882846 4.24 .060242 1.26
Optoelectronics .092218 1.97* .024145 0.49 -.062716 -1.20
Telecommunications .0664313 1.49 .0134405 0.29 -.0465934 -0.94 Computer component .1531854 2.79*** -.1996018 -3.48*** .0231223 0.38
Computer peripheral .1669296 3.24*** .0156542 0.29 -.0428352 -0.75 System and equipment .1012047 2.14** -.0404762 -0.82 -.0038424 -0.07
N 591 591 591
Adj. R2 0.3163 0.2522 0.1560
Note: * significant at the 10% level; ** significant at the 5% level; *** significant at the 1% level.
Table 23: The path analysis between R&D cooperation intensity, R&D investments, R&D outputs, and financial performance (Two-year lagged model) (cont.)
Model 4 Model 5 Model 6 Model 7 Model 8
Dependent variable:
Profit2003
Dependent variable:
Profit2003
Dependent variable:
Profit2003
Dependent variable:
Profit2003
Dependent variable:
Profit2003
Independent variables: Coef. t-value Coef. t-value Coef. t-value Coef. t-value Coef. t-value R&D cooperation intensity .248967 5.50*** .1243808 3.54*** .1310853 3.70***
R&D investment2001 .0070287 0.17 -.02379 -0.60 -.0435069 -1.42 R&D output2001 .5889773 20.49*** .5712198 19.76*** .5725459 19.81***
Capital structure2003 .065415 1.80* .0678456 2.47** .0833908 2.34** .0749895 2.75*** .0804333 2.93**
Sales growth2003 -.1607258 -4.26*** -.148524 -5.28*** -.1397737 -3.77*** -.1354096 -4.82*** -.1432882 -5.01***
Firm size2003 .5203776 13.09*** .3068306 10.00*** .3681704 7.73*** .2326455 6.30*** .2409408 6.45***
Upstream .0003244 0.01 -.011975 -0.36 -.0196507 -0.46 -.0223203 -0.68 -.0208159 -0.64 Midstream -.0228753 -0.52 -.0675408 -2.04** -.0303001 -0.70 -.0728946 -2.22** -.0647914 -1.94*
Optoelectronics .0706304 1.47 .118079 3.23*** .0927924 1.98** .1275677 3.51*** .1287002 3.55***
Telecommunications .0710679 1.55 .0959399 2.75*** .0667511 1.49 .092782 2.69*** .093428 2.71***
Computer component .1127835 2.00** .1229499 2.90*** .1484368 2.68*** .1439039 3.39*** .1351983 3.16***
Computer peripheral .1523195 2.88*** .1846732 4.59*** .167302 3.24*** .19109 4.79*** .1918271 4.81***
System and equipment .1074174 2.21** .1072193 2.90*** .1002417 2.11** .1041958 2.84*** .1024417 2.80***
N 591 591 591 591 591
Adj. R2 0.2810 0.5832 0.3168 0.5920 0.5934
Note: * significant at the 10% level; ** significant at the 5% level; *** significant at the 1% level.
Table 24: The path analysis between R&D cooperation intensity, R&D investments, R&D outputs, and financial performance (Three-year lagged model)
Model 1 Model 2 Model 3
Dependent variable:
Profit2004
Dependent variable:
R&D investment2004
Dependent variable:
R&D output2004
Independent variables: Coef. t-value Coef. t-value Coef. t-value R&D cooperation
intensity .2739623 6.65*** .1711348 3.67*** .200969 4.28***
R&D investment2001 .0279647 0.67
R&D output2001
Capital structure2004 .1791359 5.27*** .0081381 0.21 .0299327 0.78 Sales growth2004 -.1216223 -3.56*** -.1720889 -4.44*** -.017132 -0.44 Firm size2004 .3700922 8.51*** .1607931 3.26*** .3059684 6.19***
Upstream -.0401578 -1.00 .046747 1.03 .007665 0.17
Midstream -.0417754 -1.04 .1906113 4.18*** .0528157 1.15 Optoelectronics -.0403301 -0.91 .0860108 1.70* -.1188879 -2.36**
Telecommunications -.0221491 -0.52 .0027137 0.06 -.1111999 -2.33**
Computer component -.0281847 -0.54 -.1672513 -2.84*** -.1054863 -1.79*
Computer peripheral -.0277133 -0.56 .0379752 0.68 -.0902195 -1.63 System and equipment -.0108552 -0.24 -.003125 -0.06 -.0751049 -1.48
N 587 587 587
Adj. R2 0.3879 0.2147 0.2243
Note: * significant at the 10% level; ** significant at the 5% level; *** significant at the 1% level.
Table 24: The path analysis between R&D cooperation intensity, R&D investments, R&D outputs, and financial performance (Three-year lagged model) (cont.)
Model 4 Model 5 Model 6 Model 7 Model 8
Dependent variable:
Profit2004
Dependent variable:
Profit2004
Dependent variable:
Profit2004
Dependent variable:
Profit2004
Dependent variable:
Profit2004
Independent variables: Coef. t-value Coef. t-value Coef. t-value Coef. t-value Coef. t-value R&D cooperation intensity .2784324 6.68*** .2222996 5.53*** .2277828 5.61***
R&D investment2001 .0110868 0.29 -.0261201 -0.71 -.0331679 -0.94 R&D output2001 .2868404 8.00*** .2510887 7.06*** .252027 7.09***
Capital structure2004 .1432275 4.12*** .1421867 4.31*** .1793484 5.28*** .171563 5.26*** .1718046 5.26***
Sales growth2004 -.1502814 -4.19*** -.139477 -4.18*** -.1261173 -3.62*** -.1161123 -3.54*** -.1217996 -3.65***
Firm size2004 .5359057 14.10*** .4134468 10.84*** .3742921 8.52*** .292138 6.76*** .2971798 6.83***
Upstream -.0164654 -0.40 -.0236039 -0.60 -.0389367 -0.97 -.0424106 -1.10 -.0408685 -1.06 Midstream -.0270345 -0.64 -.0451385 -1.14 -.0367966 -0.90 -.0563753 -1.46 -.0501076 -1.28 Optoelectronics -.0689181 -1.50 -.0287506 -0.65 -.0380835 -0.85 -.0110826 -0.26 -.0081205 -0.19 Telecommunications -.0159404 -0.36 .0146547 0.35 -.0220783 -0.52 .0057528 0.14 .0059471 0.15 Computer component -.0728065 -1.35 -.0333036 -0.65 -.0325533 -0.62 -.0005239 -0.01 -.0059679 -0.12 Computer peripheral -.045471 -0.89 -.0158361 -0.33 -.0267214 -0.54 -.0053269 -0.11 -.0039837 -0.08 System and equipment -.0033253 -0.07 .0166346 0.38 -.0109368 -0.24 .0080247 0.19 .0079916 0.19
N 587 587 587 587 587
Adj. R2 0.3409 0.4068 0.3884 0.4368 0.4377
Note: * significant at the 10% level; ** significant at the 5% level; *** significant at the 1% level.
Figure 8: The path between R&D cooperation intensity, R&D investments, R&D outputs, and financial performance (One-year lag)
Figure 9: The path between R&D cooperation intensity, R&D investments, R&D outputs, and financial performance (Two-year lag)
0.14***
-0.003 0.07*
0.22*** 0.60***
R&D Cooperation Intensity
R&D output R&D Investment
Financial Performancet+1
* significant at the 10% level; ** significant at the 5% level; *** significant at the 1% level.
0.03
0.16***
-0.04 0.13***
0.21*** 0.57***
R&D Cooperation Intensity
R&D output R&D Investment
Financial Performancet+2
* significant at the 10% level; ** significant at the 5% level; *** significant at the 1% level.
0.03
Figure 10: The path between R&D cooperation intensity, R&D investments, R&D outputs, and financial performance (Three-year lag)