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RQ Innovative Efficiency and Firm Value

Published online by Cambridge University Press:  13 July 2021

Michael Cooper Open the ORCID record for Michael Cooper [Opens in a new window] ,
Anne Marie Knott  and
Wenhao Yang Open the ORCID record for Wenhao Yang [Opens in a new window]
Michael Cooper*
Affiliation:
University of Utah Eccles School of Business
Anne Marie Knott
Affiliation:
Washington University in St. Louis Olin Business Schoolknott@wustl.edu
Wenhao Yang
Affiliation:
School of Management and Economics and Shenzhen Finance Institute, The Chinese University of Hong Kong, Shenzhenyangwenhao@cuhk.edu.cn
*
mike.cooper@utah.edu (corresponding author)
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Abstract

We introduce and test a firm-level innovation-efficiency measure new to the finance literature. The measure, termed the research quotient (RQ), defined as the firm-specific output elasticity of research and development (R&D), was first developed in the management literature. RQ has a low correlation with existing innovation input, output, and efficiency measures. We test RQ in a number of innovation tests common to the finance literature and find that RQ is robust in all tests of firm value, even after controlling for previous innovation measures. The results suggest that RQ may serve as a relevant complementary measure of a company’s innovation.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 57 , Issue 5 , August 2022 , pp. 1649 - 1694
Copyright
© The Author(s), 2021. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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