Many previous studies invariably focused on the linear relationship between R&D investment and firm performance while overlooking there may be a quadratic effect, which may cause mixed and conflicting empirical findings, and leave some business cases difficult to understand. Thus, in this study, using a sample of 1923 IT companies from three industry sectors (i.e., hardware, computer chips and software), we empirically examine the quadratic relationship between R&D investment and firm performance within each IT industry sector. We find that there exists significant quadratic R&D-firm performance relationship within all these industry sectors. We further find that R&D investment has more impact on firm performance in software companies than in hardware and computer chips companies. From these results, we make theoretical and managerial implications.


Research and Development, Firm Performance, IT Companies, Hardware Industry, Computer Chips Industry, Software Industry


ISBN: [978-1-86435-644-1]; Full paper