The moderating effects of external monitors on the relationship between R&D spending and firm performance

We examine the nature and significance of the moderating effects of three sources of external monitoring (independent outside board members, institutional investors, and securities analysts) on the relationship between R&D spending and firm performance. We propose that these external monitors can affect either the form or the strength of the relationship between R&D spending and performance. Results showed that while institutional investors moderate the form of the R&D spending–performance relationship, independent outside board members influence the strength of that relationship. While we found evidence securities analysts have a direct impact on firm performance, they do not moderate the R&D spending–performance relationship.