Linguistic nuances and the valuation of corporate investments in innovation

The growing need to innovate with IT requires well-founded analysis of IT innovation investments. However, the time lag between such investments and the realization of an uncertain long-term value contribution challenges companies because of a conflict between short-term corporate management and the desire to maximize the company’s long-term company value. Complexity, inexperience, and high outcome uncertainty also make IT innovation investments risky, particularly as the investments relate to existing hardware, software, and human resources, and can affect the processes, products, and services of nearly every business unit in a company. This paper proposes an integrated long- and short-term valuation approach that incorporates an IT innovation investment’s effect on the value of a company’s IT portfolio. The approach simultaneously accounts for risks and interdependencies, and uses sensitivity analysis in the context of an application example to provide research and practice recommendations.

This article examines the role of top managers in shaping the innovation investment actions of small and medium-sized enterprises (SMEs) in India. Survey responses from 477 top managers of Indian SMEs suggest that investment in innovation is influenced by top manager perceptions of innovation opportunity attractiveness, as well as ability to appropriate innovation investment value. Specifically, the results indicate an inverted U-shaped relationship between top manager entrepreneurial orientation and firm investment in innovation. They also suggest that top manager perceptions of environmental munificence, firm resource management capabilities, and organizational controls are positively related to firm investment in innovation.

Along with the acceleration of the process of innovation investment in recent years, emerging market media coverage has been utilized by companies to enhance their competitiveness. The study conducts a theoretical analysis and an empirical test of the relationship between media reports and innovation investment, as well as the impact of media reporting attitude and reporting source on corporate innovation, using panel data for the period 2010-2021 for A-share-listed companies in Shanghai and Shenzhen, China. These findings show that media reports are influenced by media emotions, which can promote corporate investment in innovation, mainly in non-state-owned enterprises. They also have implications for enterprises and governments, who can leverage the media and public opinion to align with long-term interests and promote the positive development of enterprises.

In order to explore the potential relationship between the innovation investment and the enterprise financial structure, the work gathered the related data, using KMO and Bartlett's Test to test whether the factors tested could be used in the following factor analysis, and principal component analysis to find the commonalities among several shareholders proportion related factors. Then the work used the regression analysis and ANOVA to test the significance of different financial structure related factors to the innovation. Our empirical results showed that financial structure truly has an inevitable impact on innovation investment. The lower the debt financing, the simpler the financial structure, the later the companies go IPO, the lower the equity capital, the company would devote more to innovation investments. Also, there is no big difference in debt financing, equity financing, internal financing, and cash flow level between the offshore and onshore natural persons.

Purpose - This study investigates the impact of equity financing on the valuation of R&D investments using a sample of firms from 33 countries from 1997 to 2018.
 Design/methodology/approach - I use a modified version of the valuation regression widely used in the literature.
 Findings - I find evidence that R&D investments are more highly valued when financed through equity. In contrast, debt financing does not affect the valuation of R&D investments. I also document that the impact of equity financing on R&D investment valuation weakens during the financial crisis.
 Research implications or Originality - In light of the distinctive characteristics of innovative investment, previous research investigates its relationship with financing. What remains unexamined, however, is how financing choices impact the way investors value innovative investments. This study seeks to bridge this gap in the existing body of research using a sample of firms from 33 countries from 1997 to 2018, for 22 years.

To encourage corporate investment in innovation or R&D and foster innovative firms, the government of China established standards for the certification of high-tech enterprises in 2008. The business entities that fulfill these standards are entitled to tax deductions. One of the criteria is the ratio of R&D expenses to sales exceeding a specific percentage (which depends on the annual revenue) in the preceding 3 years. Moreover, this study examines data from the CSMAR database for the period 2008-2019 and includes data from 8,233 listed high-tech enterprises. The results show that if the proportion of pre-managed R&D expenses to pre-managed sales that are less than 6% (or 5%), 4%, or 3% in the past three years of firms with different sales range in the current year and managed earnings through sales or R&D expenses to fulfill the standards required for the certification positively influenced the costs of debt (non-significant).

US Securities and Exchange Commission (SEC) enforcement actions are intended to protect investors and limit expropriation by firm insiders, but these SEC actions could affect insiders' incentives to contribute to value‐enhancing activities. Therefore, we explore how corporate innovation and performance respond to insider trading restrictions imposed by regulators and firms. Using manually collected data on SEC indictments against corporate insiders, we document more innovative activity following external insider trading restrictions. External restrictions are also followed by higher corporate investment, capital access, and operating performance. Similarly, internal blackout restrictions to insider trading are linked to more innovation as well. We use SEC and congressional rule changes as quasi‐natural experiments resulting in shocks in enforcement and indictments for identification and inference. Our results suggest insider trading restrictions and enforcement actions affect subsequent firm activities and managerial decisions by protecting outside investment, resulting in more investment in innovation.

To encourage corporate investment in innovation or R & D and to foster innovative firms, the Chinese government established standards for the certification of high-tech enterprises in 2008. Business entities that meet these standards are entitled to tax deductions. The criteria include the proportion of R & D expenses to sales exceeding a certain percentage in the prior 3 years among different sales in the current year. The purpose of this paper is to investigate whether this criteria influence management’s preferences for an earnings threshold. This study collects data from 2008 to 2018 from the CSMAR database. All of the 1932 listed high-tech enterprises are included, with a total of 7547 samples. The results indicate: sales of 50 - 200 million yuan in the current year and a proportion of R & D expenses to sales in the prior 3 years before manipulating sales or R & D expense; sales above 200 million yuan in the current year, and that most of these firms’ proportion of R & D expenses to sales before manipulating sales or R & D expenses achieved the required ratio to qualify as a high-tech enterprise. Specifically, the results suggest that 88.83% of the listed high-tech enterprises in China focus on R & D activities or innovations, regardless of whether they qualify as a high-tech enterprise according to the Chinese government. However, a few of the samples’ proportion of R & D expenses to sales are below 3% in the prior 3 years when their sales exceed 200 million yuan in the current year before the manipulation of sales or R & D expenses. Of these firms, half have a proportion of R & D expenses to sales exceeding 3% after the manipulation of sales or R & D expenses. Overall, the results also support the presence of prospect theory in Chinese-listed high-tech enterprises, because mangers tend manipulate earnings by adjusting sales or R & D expenses to obtain tax benefits.

This study examines the relations between leverage and investment and the relations between leverage and firm value during the COVID-19 period using data from Chinese listed companies. We find that the COVID-19 pandemic has strengthened the inhibition of leverage on corporate investment and firm value, while alleviated the constraint of leverage on corporate cash holdings. Furthermore, the pandemic-induced negative relationships are stronger for non-SOEs, firms holding less cash, multinational firms and firms in severe epidemic areas. Overall, our results are consistent with the risk-aversion theory. Higher economic uncertainty increases the firms’ risk aversion and eventually strengthens the negative relations between leverage and investment.

Corporate investments are expected to create value for firms. Although some studies report evidence supporting such expectations, many studies document contradictory findings. However, it is not clear why corporate investments create value in some firms but reduce value in others. The purpose of this study is to examine the extent to which the quality of corporate governance and the degrees of financial constraints affect the relationship between corporate investments and hotel firm value in a unified model where both weak corporate governance and financial constraint problems are concurrently observed. Shareholders of poorly governed firms place a lower value on corporate investments compared with those of well-governed firms, whereas shareholders of financially constrained firms perceive corporate investments to be of greater value compared with those of unconstrained firms. The results further showed that CEOs of financially constrained firms make value-increasing investments despite poor corporate governance mechanisms. Theoretical and practical implications are discussed within the realm of corporate finance theories.

Green Knowledge Management (GKM) plays a pivotal role in driving organizational green innovation by enhancing sustainability through the systematic acquisition, storage, sharing, and application of green knowledge. Studies demonstrate that GKM significantly contributes to business sustainability and innovation capabilities, as seen in the mining industry of South Kalimantan, where elements like green knowledge acquisition and application positively impact performance. Institutional support is crucial, with universities needing to reconfigure their infrastructures to foster green innovation. Collaborative multi-stakeholder efforts are vital for producing actionable insights, while government investment in green innovation proves more effective than corporate investment due to a higher risk appetite. To achieve this, we conducted an extensive search of scholarly articles from reputable databases such as Scopus and Web of Science (WoS), focusing on studies published between 2022 and 2024—the flow of study on the PRISMA framework. The database found (n=518) that the final primary data was analyzed. The findings were divided into three themes: (1) Green Knowledge Management and Green Innovation, (2) Green Knowledge Management and Organizational Performance, and (3) Green Knowledge Management and Organizational Learning Capabilities. The integration of digital technologies further enhances green innovation performance, underscoring the need for comprehensive strategies that incorporate resource management, institutional support, and technological advancements to achieve organizational sustainability and innovation. Future research should explore GKM's impact across various industries and cultural contexts to develop holistic approaches for enhancing green innovation and performance

Despite the fact that one of the main goals of corporate venture capital (CVC) investments in high-tech industries is to gain a window on future technologies, the relationship between CVC investments and strategies used to acquire technologies in the markets, such as licensing, has not been adequately explored. To address this gap, we build on the real option literature suggesting that CVC investments can be used as real options in the markets for technology. Accordingly, we formulate hypotheses about key drivers of the option value of CVC investments and the decision to exercise the option. Using a longitudinal dataset based on 604 dyads formed by a sample of global pharmaceutical firms and their external technology partners, we find that corporate investors' scientific capabilities, technological domains, research pipelines, and the resolution of exogenous uncertainty related to partner firms' technologies impact investors' decisions on CVC investments and ex post technology acquisition. In our research setting, the most common way to exercise the option post-CVC investment is via technology licensing.

Downward Wage Rigidity, Corporate Investment, and Firm Value

This paper uses the micro data of Chinese listed companies from 2003 to 2015 and the house price data of each province to study the relationship and the mechanism between the housing collateral value of listed companies and the company's investment. The study found that corporate investment is positively correlated with the value of housing collateral and the housing collateral value has a positive impact on corporate investment by acting on debt capacity. The results show that there is a collateral channel between the housing collateral value and the company's investment, which provides direct evidence for the positive impact of the housing collateral value to corporate investment.

The combined deployment of process analytical technology (PAT) and Lean manufacturing offers extraor- dinary financial opportunities for pharmaceutical manufac- turers at every scale. While many articles have been published describing the economic and quality opportuni- ties presented by improved pharmaceutical manufacturing performance, greater understanding of the financial benefits of PAT and Lean at the individual company level is needed to support accurate valuation of corporate investments in manufacturing performance upgrades. This paper describes research using industrial benchmarks and published data for publicly-traded companies to demonstrate the value poten- tial posed by combined deployment of PAT and Lean in pharmaceutical manufacturing operations. A method of estimating the financial return on investments in PAT and Lean is described by considering their impact on the profitability of a hypothetical mid-sized generic pharma- ceutical manufacturer. The results of the case study show that based on benchmark data for the generic drug manufacturers, it is possible to return savings of up to 6% of revenues by improving process capability and supply chain management through strategic deployment of PAT and Lean manufacturing.