R&D Expenditures And Investors Perception For An Input On Innovation Creation And Firm Growth: Empirical Evidence From Athens Stock Exchange

Abstract

The question that the present study attempts to examine, concerns whether investors value the potential of Greek enterprises to produce innovation, in a way that it could lead them to higher productivity, profitability and future growth. An answer to such a question, seems to bear significance for a country that tries to understand the reasons for an underachieving economy, struggling for growth, both macro and microeconomic. If the answer is positive, this means that investors are affected in their decision for buying or selling a stock by the growth prospect that innovation, expressed with R&D spending, creates for an enterprise. R&D expenditures are used in this study, since they represent the enterprises input for the creation of innovation (Acs & Audretsch, 1988) and therefore, the effort for future development and firm growth. The approach employed, follows the same rationale as Green et al, (1996) and Stark and Thomas (1998) do. The R&D data that we have utilized, are collected from all the Athens Stock Exchange, (henceforth ASE), public firms for the period 2005-2010 that spend on R&D. The results, unlike previous research, depict a strong negative relation between R&D expenditures and stock price. In other words, investors in this Eurozone country do not consider R&D expenditures to be creators of innovation that will result in future growth, but they seem to be affected negatively in their assessment of the firms financial condition by R&D spending.