The effect of R&D on performance: Do R&D-intensive firms handle a financial crisis better?

This empirical study investigates the effect of a high R&D intensity on performance during a financial crisis. Though the general positive connection between R&D and subsequent growth is well known, existing literature provide managers with limited guidance about the particular role of R&D in a recession. Using binary logistic regression on a sample of 247 Norwegian manufacturers, we find that firms who devoted considerable resources to R&D activities performed significantly better than other firms through the late 2000s financial crisis. This connection was even stronger than the one found during a period of normal growth, implying that the importance of R&D is accentuated during a crisis. We provide several possible explanations for this. This study also addresses gaps in the literature relating to the time lag between R&D investment and effect on revenue. We find a gap of two years, with an even stronger effect after three years.