Although much research has been carried out to examine various contextual issues and moderating factors for successful R&D investments, very little research has been conducted to explore the role of a ﬁrm’s operational and process characteristics. In this study, we explore how ﬁrms could possibly enhance the ﬁnancial returns of R&D investments through quality management, using Six Sigma implementation as an example, and efﬁciency improvement, using the stochastic frontier estimation of relative efﬁciency as a proxy. Based on data from 468 manufacturing ﬁrms in the United States over the period 2007–2014, we construct a dynamic panel data model to capture the effects of R&D investments on ﬁrms’ ﬁnancial returns in terms of Tobin’s q. Using the system generalized method of moments estimator, our results indicate that the ﬁnancial returns of R&D investments are signiﬁcantly enhanced when ﬁrms adopt Six Sigma and improve efﬁciency in operations. Our additional analyses further suggest that such an enhancement effect through quality and efﬁciency improvements is more pronounced under high operational complexity as approximated by labor intensity and geographical diversity. Instead of considering innovation activities and process management as contradictory functions, we show that quality and efﬁciency improvements indeed support ﬁrms’ R&D investments, leading to higher ﬁnancial returns.
- R&D investments
- Six Sigma
- Tobin's q
- operational efficiency
Yiu, L. M. D., Lam, H. K. S., Yeung, A., & Cheng, T. C. E. (2020). Enhancing the Financial Returns of R&D Investments through Operations Management . Production and Operations Management, 29(7), 1658-1678. https://doi.org/10.1111/poms.13186