The role of R&D and corporate governance in Korea: IT firms versus non-IT firms

Authors:
Joon Ho Hwang;Min-Su Kim;Se-Hak Chun
Affiliations:
Business School, Korea University, Seoul, Korea 136-701;Business School, Korea University, Seoul, Korea 136-701;Department of Business Administration, Seoul National University of Science and Technology, Seoul, Korea 139-743
Venue:
Information Technology and Management
Year:
2013

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Abstract

Recent economic development in Korea was mostly driven by companies in the IT sector. Also, it is widely argued that R&D investment has a positive impact on firm value, especially for IT firms. In this paper, we analyze how R&D investment has contributed to the growth of Korea's economy by examining the effect of R&D investment on firms' market value, measured as Tobin's Q, and investigate whether this effect is different between firms in the IT sector and firms in the non-IT sector. We also account for the effect of another major change experienced by Korean firms: changes in corporate governance structure. We find that for firms in the IT industry, higher R&D investment coupled with high foreign ownership results in higher firm valuation.