Real effects of capitalized research and development expenditures: a leading indicator for future innovation performance?
Abstract This paper analyzes the relationship between capitalized Research and Development (R&D) expenditures under IFRS and innovation performance measured by patent data. Under IFRS, development expenditures are capitalized when the success of an R&D investment is highly likely. Hence, such capitalization could be a leading indicator for future innovation performance. We analyze this question based on a hand-collected sample of R&D capitalization data under IFRS and patent data from the European Patent Office’s Worldwide Patent Statistical Database. We find that the capitalization rate of R&D is positively related to future patent applications and citations as measures of future innovation performance. We also find a positive association with measures of future financial performance. The results imply that the rate of R&D capitalization is informative and can be considered a leading indicator for future innovation performance.
Authors
- Philipp Sandner
- Wolfgang Schultze (ORCID: https://orcid.org/0000-0001-6216-6514)
- Wolfgang Herb
- Maria Lotze
Institutions
- University of Augsburg (DE)
- Frankfurt School of Finance & Management (DE)
Publication Details
- Journal
- Review of Quantitative Finance and Accounting
- Published
- 2024-08-09
- DOI
- https://doi.org/10.1007/s11156-024-01310-3
- Citations
- 9
- Primary Topic
- Innovation Policy and R&D
- Type
- article
- Field-Weighted Citation Impact
- 10.16