Ethical image, corporate social responsibility, and R&D valuation

This study examines whether socially responsible firms carry higher research and development (R&D) valuation, and how product market competition affects this relationship. From a sample of U.S. firms over the period 1995-2010, we find firms with stronger corporate social responsibility (CSR) performance to have higher R&D valuation. This result supports the view that CSR efforts create an ethical and healthy corporate image which lends credence to its R&D projects. As expeted, the above positive relationship between CSR efforts and R&D valuation is significant only in highly competitive industries. This study contributes to the literature by demonstrating that ethical image affects the market's perception on R&D investments and the valuation of the firm.