THE EFFECT OF R&D ACTIVITIES ON FINANCIAL PERFORMANCE IN THE FIRMS OF THE REAL SECTOR: EVIDENCE FROM TURKEY

Abstract

In recent years, the increasing effect of globalization and its result of high competition environment, constantly the increasing consumer demands and technological developments lead companies to make innovation. In a highly competitive environment, the companies increase their R&D activities to respond to consumer demands and to achieve the targets of the companies. The effect of these activities on the financial performance of the firms is generally considered as a positive effect. However, these activities have a cost for the firm which constitutes a risk. Therefore, the effects of R&D activities on companies can be different. In this context, the aim of the study is to determine the relationship between financial performance and R&D activities in the companies operating in the real sector, taking into account the scale of the firm. For this purpose, the data of the firms of the real sector during the period between 2010 and 2020 has been analyzed with the Two-Step System Generalized Moments Method (GMM).According to the obtained findings; There is a negative relationship between R&D intensity and financial performance in micro- sized firms. However, this relationship positively changes in small and medium-sized firms. As far as general analyzes are concerned, without scale effect, R&D activities have a positive effect on financial performance in the companies of the real sector.