The Effect Of R&D Investment On The Ability Of Value Creation For Companies

In recent years, with the concept of value creation being proposed, more and more companies start to focus on capital efficiency.They are no longer satisfied with the simple, mechanical duplication of effort, but is committed to the pursuit of the intrinsic value of creativity in order to achieve sustainable development. Meanwhile, our government also gives a positive policy-oriented advocacy of value creation for its core business development and growth patterns to ease the current situation of China’s large population and scarce resources. However, due to historical, cultural, geographical and other factors, the awareness of China’s economic foundation and companies are relatively weak, so the value creation ability of Chinese companies are still not optimistic, and there is a big regional differences. As the central city, the level of economic development of Hubei is backward. Its enterprise’s ability to create value even more inadequate. But it has much room for development and potential, especially the "Rise of Central China" strategy currently being implemented. Therefore, the perspective of "value creation" becomes the starting point of this paper’s regional studies of Hubei.Then, this paper research enterprise value chain dates back to business value creation capacity of the core driving force-the R&D activities.Therefore,it has a certain theoretical and realistic guidance significance.China’s capital market to be further improved, and the relevant guidelines on corporate R&D investment don’t make the mandatory disclosure requirements, so there is a certain difficulty in collecting relevant data. On the basis of collecting and collating a lot of related literature, it has been the basis of data of this study,with high accuracy and reliability, access to the China Statistical Yearbook, by hand, the relevant data of the Statistical Yearbook of Hubei and listed companies of Hubei2003-2010financial statements and notes.On the basis of the home and abroad own research,this paper made a systematic methodology for the guidance and uses a variety of research methods,for example,a combination of theoretical and empirical.As a result,there were some valuable conclusions.1.The analysis and conclusions of the theoretical level. This paper defined the the basic concept and connotation about the R&D activities and value creation.Then it discussed the theoretical foundation from the perspective of economics and management science. The measure of value creation capabilities depended on the indicators.By comparing with traditional indicators.this paper selected Capital Maintenance and Appreciation. Market Value Added (MVA) as the indicators to measure the value creation capabilities from the financial value and the market value.The paper analyzed the drivers of corporate value creation by using the value chain theory.The study found that the R&D investment was the core drivers of value creation.what’s more, this paper discussed the value Correlation of the R&D investment from the financial value and market value,which provided a strong theoretical support for this study.2.The analysis and conclusions of the status level. This paper selected Capital Maintenance and Appreciation, Market Value Added (MVA) as the indicators to measure the value creation capabilities from the financial value and the market value by collecting and calculating the relevant datas of the listed companies in Hubei in2003-2010. This study of status found that there were significant problems. In order to trace the origin of their problems, this paper analyzed the distribution of R&D resources in the regions and industries by collecting and collating the China Science and Technology Statistics Yearbook data.lt found that there were also many problems in corporate’s R&D investment. So it was preliminary determined that the lack of corporate’s R&D investment affected the enhancement of its ability to create value to a certain extent.3.The analysis and conclusions of the empirica level.This paper used the2003-2010datas of the listed companies in Hubei as the initial sample. Based on the results of previous research, the corporate’s R&D investment with a lag (This paper selects a lag of one year). So this paper selected the enterprise’s R&D datas in2003-2009, and selected other datas in2004-2010. And it deleted the datas which is not complete,missing or wrong. There are306samples of datas. This paper processed and analyzed the relevant datas by using statistical analysis software SPSS16.0.This paper created an empirical test from the financial value and market value by using stepwise regression methods.(1)The empirical testing and conclusions of the ability to create financial value.This paper selected the ability of creating financial value(Capital Maintenance and Appreciation) as the dependent variable and selected the R&D investment(RD) as explanatory variables.Firm size (total assets of the natural logarithm of the SIZE), financial risk (DFL),development capacity (net profit growth) and cash strength (CFR) were selected as the control variables. The results showed that the ability to create financial value of the listed companies in Hubei created the positive correlation with the level of R&D investment and firm size. On the contrary, the ability to create financial value of the listed companies in Hubei created the negative correlation with the financial risk. However, there were no significant correlation among the ability to create financial value,the development capacity and cash strength, The reason was that they did not enter into the regression model.(2) The empirical testing and conclusions of the ability to create market value.This paper selected the ability of creating market value(MVA) as the dependent variable and selected the R&D investment(RD) as explanatory variables.Firm size (total assets of the natural logarithm of the SIZE), financial risk (DFL),development capacity (net profit growth), cash strength (CFR) and profit capacity (ROE) were selected as the control variables.The results showed that the ability to create market value of the listed companies in Hubei created the positive correlation with the level of R&D investment and profit capacity. On the contrary, the ability to create market value of the listed companies in Hubei created the negative correlation with the financial risk. The variable Firm size entered the model four, it indicated that Firm size created a positive correlation with the ability to create financial value.But its contribution was very small. In addition, the net profit growth and CFR did not enter into the model. It indicated that there were no significant correlation among the ability to create market value.the development capacity and cash strength.There was some problems in the R&D investment of companies in Hubei.For example, the companies lack the sense of innovation and the investment structure is irrational.The author gives the following suggestions from the internal mechanism and external environment.1.Improve the internal mechanism. The companies should enhance the awareness of innovation,make scientific research and decision,establish the financing system,perfect R&D investment structure,enhance communications with other companies and strengthen the protection of the outcome.2.optimize the external environment. The market economic system should be improved and play its role in configuring the R&D resources. The government should play a policy-oriented role in promoting and protecting the R&D activities.The universities and research institutions should actively cooperate with companies to meet the needs of enterprise development.