Research On The Signailling Role Of Firm Resource And Environmental Trubulence In The Process Of Investor Reaction To R&D Investment

In the competitive era of globalization,innovation is the most important internal factor that companies can win a place in a competitive global marketplace.Given that innovation capability mainly depends on R&D ability;firms thus pay more attention to R&D activities.From the perspective of resource-based view,by producing new product and technology,R&D activities could improve firm's innovation capability,thereby increasing the competitive advantage,so that enterprises have a lasting business growth.Given the important role of R&D for the future development of enterprises,it becomes the most important factor the investors would pay attention to when evaluating the value of firms.However,due to China's listed companies still have some serious issues such as low quality of information disclosure,so outside investors are still in a bad situation in terms of the information of innovation activities.Because investors cannot get any real information about the progress and expected income of R&D projects,so they cannot make an accurate judgment about the value of R&D investment,leading to information asymmetry between firms and investors.We found that most of the existing literature examines the value of R&D from the perspective of firms,and few studies examines how investors judge the value of R&D based on the problem of information asymmetry.For this research gap,in this paper,we focus on how investors respond to R&D investment,which factors would impact investors in this process,and through which way the information value of R&D inv estment has an impact on investors.Based on the market signaling theory,strategic fit theory and resource-based view theory,we define R&D as information with uncertain quality.To reduce information asymmetry,we propose that investors would search for some signals emanating from firms to judge the potential value of R&D.Based on strategic fit theory,we propose that whether firms have resources that fit with R&D activities,and whether R&D activities are fit with external environment provide further information for investors to evaluate the value of R&D.Therefore,we propose that the matching resource of R&D and external environment are the signals used by investors,which means they have a signaling role.For R&D information value transmission,we propose that technological resources could improve the effectiveness of R&D investment,thus the value of R&D is transmitted to investors by technological resources.The above analysis constructs the conceptual model and hypotheses,providing a theoretical basis for the subsequent empirical studies.First,we examine investor's respond to R&D and signaling role of matching resource of R&D under the situation of information asymmetry.Based on a sample of Chinese pharmaceutical listed companies,using SPSS19.0 software,we found that investors have a positive response to R&D investment.Second,we examine the signaling role of financial resources and TMT background.Specifically,we use growth,profitability and capital structure(debt level)to represent the fi nancial resources and examine the signaling role of above factors.Results show that growth has positive signaling effect,debt has a negative signaling effect,and profitability does not have a signaling effect.Using Modprobe software,we conduct conditi onal interaction analysis,and found that only when growth is at a very high level and debt is at a low level that the signaling effect exists.Meanwhile,we use TMT size,TMT tenure,TMT shareholding and TMT compensation to represent TMT background,and found that TMT size has a positive signaling effect,TMT shareholding and TMT compensation have a negative signaling effect,and TMT tenure does not have a signaling effect.By conditional interaction analysis,we found that the signaling effect of TMT size is significant at every level,only when TMT shareholding is at low levels and TMT compensation is at high levels that their signaling effect exits.Third,we examine the signaling role of environmental turbulence and the signaling role of financial resources and TMT background under different environmental turbulence.We use technological environmental turbulence and market environmental turbulence to represent environmental turbulence.By theoretical analysis,we predict the direction of signaling effect.We found that market environmental turbulence has a positive signaling effect and technological environmental turbulence has a negative signaling effect.By conditional interaction analysis,we found that only when market environmental turbulence is at v ery low or high levels that the signaling effect exits,and that the signaling effect of technological environmental turbulence is significant at every levels.We also found that under high levels of environmental turbulence,the signaling effect of financ ial resources and TMT background is stronger.Finally,we examine the signaling role of technological resources.We analyze the information value transmission path and construct a mediation model between R&D investment and investors.By empirical studies,we found that new product announcement is the only path between R&D investment and investors,and that new technology and new patent has no signaling effect.From the perspective of information asymmetry,we examine the investor reaction to R&D investment and the signaling role of firm resource and environmental turbulence.Theoretically,for the first time,we introduce signaling theory to the field of R&D value,which enriches the perspectives of research.We construct the model of investor reaction to R&D investment under the situation of information asymmetry and R&D investment information value transmission model.Practically,investors would be able to know signaling game process between firms and themselves,which helps investors make a more rational investment decisions;our research also enable enterprises to better understand how investors interpret signals,which helps business to obtain positive feedback from investors.