R&d Investment And Enterprise Value Of Listed Companies In Our Country

Research and Development (R&D) is an integral part of the strategy of invigorating the country through science, technology and education. The R&D investment assures the smooth carry out of R&D’s activities, propels the advancement of the science and technology and in turn improves the productivity and accelerate the economic growth. The research on the R&D by economists start from the time of Joseph A. Schumpeter and systematic researchs were started from1950’s by many scholars. The main focus areas were on R&D’s return on investment, R&D’s productivity, R&D’s spillover etc. The most outstanding scholars were Bernstein, Griliches, Mansfield, Romer and Solow. They started from the return on investments of R&D and focused on the output and input of R&D from the economic perspective which resulted quite few of important research achievements. And among them, the most representative ones are the theory of economic growth based on the technology advancement by Solow and human resource investment theory by Romer.This paper was based on the theory of R&D investment, Corporate valuation and the previous work completed by the researchers, analyzed the35listed pharmaceutical companies ("the companies") with the consecutive disclosure of the R&D spending over the last6years and utilized the related financials in their annual financial statements. This paper begins with the descriptive analysis the R&D spending of the companies from year2005to year2010. Then, based on the Cobb-Douglas function and empirical analysis, take the companies’ R&D spending, R&D staff and fixed assets as the explanatory variables and take the companies’financial value (revenue and gross margin) and market value (market value and Tobin Q) as the explained variables. Thirdly, set up the empirical model for the study of the relation between the R&D investment and companies’valuation.After the research and study, here are the results:firstly, the R&D’s accumulative capital investment has the positive relation to both the financial value and the market value of the companies. Secondly, the invested R&D staffs have the clear coefficient with the companies’gross margin, and no coefficient with other explained variables. Thirdly, the fixed assets have strong correlation with the financial value and market value of the companies.Finally, based on the findings of the research, some suggestion and recommendations were put forward:from the perspective of the government, more support need to be provided the R&D entities both financially and non-financially, meanwhile, more clear instructions were required for the R&D disclosure in the financial reports. From the perspective of companies, more bolder financial investment were encouraged, the R&D team need to be rationalized, plan the R&D from strategic perspective and change the companies into a learning organization. Upgrade the innovation capabilities by fully utilizing the spillover effect R&D knowledge.