Abstract
This paper investigates the influence of corporate R&D investment on a firm's subsequent profitability and also examines the differences in R&D efficiency among firms of different sizes. In addition, the relationship between firm size and R&D investment is also determined. It is based on regression analysis of 170 Japanese firms in chemical and pharmaceutical industry. The results indicated that the R&D expenditure and R&D intensity are positively and significantly related to the return on assets, return on equity, gross profit margin, operating income margin and ordinary income margin. Larger firms also proved to be more efficient in their management of R&D for profits for all the above mentioned profitability variables. In addition, the findings imply a positive and significant relationship between the firm size and R&D investment, both in terms of an absolute amount and a ratio to sales.
