The impact of R&D investments on firm performance for European listed firms.

This paper investigates the impact of R&D investments on firm performance. There is still much ambiguity about this impact due to varying results among existing literature. Ordinary least squares (OLS) regression is applied to a sample of 472 European listed companies over the period 2011-2019. This revealed a clear inverted U-shaped relationship between R&D investment and firm performance. A nonlinear relationship, which indicates that it is profitable to invest in R&D up to approximately 1.60%. Additionally, it is also found that there is a negative relationship between R&D and high R&D firms (R&D intensity >1%) and a positive relationship between R&D and low R&D firms (RD intensity <1%). It is also observed that a larger firm size enhances firm performance while a highly leveraged company is strongly restricted in its R&D opportunities.