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How R D intensive firms react to the COVID-19 pandemic: Evidence from a quasi-natural experiment

Heliyon, 2023-09, Vol.9 (9), p.e19329 [Peer Reviewed Journal]

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Title:
How R D intensive firms react to the COVID-19 pandemic: Evidence from a quasi-natural experiment
Author: Trang Hanh Lam Pham ; Dung Hoai Thi Nguyen ; Vu Tuan Chu ; Kien Duc Nguyen ; Bich-Ngoc Thi Pham
Subjects: Innovation ; R&D, Firm Performance
Is Part Of: Heliyon, 2023-09, Vol.9 (9), p.e19329
Description: Prior research suggests that R&D intensive firms are especially vulnerable during crises due to their narrow specialization, high adjustment costs, increased distress risks, and higher sensitivity to financial distress. This paper exploits the difference in the research and development intensity as a quasi-natural experiment to examine the impact of the coronavirus pandemic on firm performance. Our study finds that the adverse consequences of COVID-19 on firms' profitability have been less pronounced for R&D intensive firms. R&D intensive firms are also able to record more positive changes in cash holdings as a response to the COVID-19 pandemic. As a result, R&D intensive firms are less likely to rely on external financing and record a lower level of increase in financing. Our results further highlight the potential function of R&D investment as a panacea for firm's growth during economic downturns.
Publisher: Elsevier
Language: English
Identifier: ISSN: 2405-8440
EISSN: 2405-8440
Source: PubMed Central
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