A Study on the Relationship Between R&D Activity and Performance of the Korean Venture Firms: Focusing on the Moderating Effect of Industrial Structure Characteristics

Abstract

Purpose: This study proposes to analyze the relationship between venture firms’ R&D investment and performance, furthermore to verify the moderating effect of industrial concentration in a row. Research design, data, and methodology: In order to test the hypotheses, this study was conducted with the panel data of 300 venture firms listed on the Korean KOSDAG market for the period from 2014 to 2020. Results: The main results of this study are summarized as follows. First, we confirm that R&D investment as an independent variable had a significantly positive(+) effect on technological performance measured by patent, and industrial concentration had a significantly positive(+) moderating effect on the relationship between R&D investment and technological performance. Second, positive correlation was found between R&D investment and return on equity (ROE), market value(Tobin’s Q). In addition, industrial concentration had a significantly positive(+) moderating effect on the relationship between R&D investment and ROE, whereas it had a significantly negative(-) moderating effect on the relationship between R&D investment and Tobin’s Q. Finally, although technological performance as an independent variable had no significant effect on ROE, meanwhile industrial concentration had a significantly positive(+) moderating effect on the relationship between technological performance and ROE. Implications: Higher R&D investment helps venture firms increase their technological performance, ROE, and Tobin’s Q. However, in non-competitive market, while R&D investment effect on technological performance and ROE is greater, R&D investment has a weaker effect on Tobin’s Q. Besides, although technological innovation has no direct correlation with ROE, non-competitive market helps venture firms improve ROE with technological innovation. Last but not least, firms can take advantage of their technological innovation to enhance Tobin’s Q, especially in non-competitive market. The findings reveal a more comprehensive picture about the Korean venture firms’ R&D investment efficiency and the effect of market structure on R&D investment efficiency, providing insightful implications for firms and government.