TY - JOUR
T1 - Earnings Component Volatilities
T2 - Capital Versus R&D Expenditures
AU - Lev, Baruch
AU - Radhakrishnan, Suresh
AU - Tong, Jamie Yixing
N1 - Publisher Copyright:
© 2020 Production and Operations Management Society
PY - 2021/5
Y1 - 2021/5
N2 - This study examines the relationship between R&D expenditures and product-market, process-cost, and technological innovation/disruption-related uncertainties. For this purpose, the product-market, process-cost, and technological innovation related uncertainties are linked to earnings component volatilities. Specifically, product-market uncertainty is measured by future sales volatility; process-cost uncertainty by future cost of sales volatility; and technological innovation uncertainty by future special items volatility. The results show that the associations between R&D expenditures and future sales and cost of sales volatilities are lower than those of capital expenditures. However, the association between R&D expenditures and future special items volatility is higher than that of capital expenditures. Collectively, these findings provide insights into the debate on capitalizing versus expensing R&D expenditures.
AB - This study examines the relationship between R&D expenditures and product-market, process-cost, and technological innovation/disruption-related uncertainties. For this purpose, the product-market, process-cost, and technological innovation related uncertainties are linked to earnings component volatilities. Specifically, product-market uncertainty is measured by future sales volatility; process-cost uncertainty by future cost of sales volatility; and technological innovation uncertainty by future special items volatility. The results show that the associations between R&D expenditures and future sales and cost of sales volatilities are lower than those of capital expenditures. However, the association between R&D expenditures and future special items volatility is higher than that of capital expenditures. Collectively, these findings provide insights into the debate on capitalizing versus expensing R&D expenditures.
KW - R&D
KW - capital expenditure
KW - volatility
UR - https://www.scopus.com/pages/publications/85099112722
U2 - 10.1111/poms.13333
DO - 10.1111/poms.13333
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AN - SCOPUS:85099112722
SN - 1059-1478
VL - 30
SP - 1475
EP - 1492
JO - Production and Operations Management
JF - Production and Operations Management
IS - 5
ER -