Innovating for Sustained Growth: The Impact of R&D and Intangible Assets on the Performance of Indian Companies

In the pursuit of sustained growth, businesses allocate resources for research and development (R&D) activities, aiming to gain a competitive edge and adapt to market changes. This study empirically examines the impact of R&D expenditure and intangible assets on the financial performance of Indian companies. A novel composite research intensity variable, encompassing various research and innovation expenditures, is introduced. The results indicate that increased investments in R&D and intangible assets negatively affect accounting-based performance metrics but positively influence market value. These findings offer valuable insights for investors, business leaders, and decision-makers. One of the concerning facts is that alternative innovations or firms concentrating on environment-friendly production fail to ensure a better firm performance. As India’s economic landscape evolves, influenced by environmental and regulatory dynamics, the study contributes to understanding the multifaceted relationship between research expenditure, intangible assets and firm performance, highlighting the increasing importance of such investments in a changing global market. JEL Codes: O32, Q55, O16, Q56, G31, O38