The Effect of R&D intensity, intellectual capital and managerial ability on firm’s performance with political connection as a moderating variable
DOI:
https://doi.org/10.14414/tiar.v10i1.1909Keywords:
R&D Intensity, Intellectual Capital, Managerial Ability, Firms’ Performance, Political ConnectionAbstract
This study aims to examine and analyze the effect of Research and Development (R&D) intensity, intellectual capital, and managerial ability on firm’s performance both directly and indirectly moderated by political connection. This study uses manufacturing sector firms listed on the Indonesia Stock Exchange which were selected using a purposive sampling method, with a total of 119 data observations (2013 - 2017) and using a quantitative approach. This study uses multiple linear regression analysis and hierarchical regression analysis. The results of the study prove empirically that the firm’s performance can be improved by increasing the intensity of R&D and intellectual capital. The existence of political connections can strengthen the influence of the relationship of R&D intensity on a firm’s performance. The firm’s performance is not related to managerial ability and political connection cannot strengthen or weaken the influence of intellectual capital on managerial performance and ability.
References
Ades, A., & Tella, R. D. (1999). Rents, Competition, and Corruption. 89(4), 982–993.
Andreou, P. C., Karasamani, I., Louca, C., & Ehrlich, D. (2017). The impact of managerial ability on crisis-period corporate investment. Journal of Business Research, 79(May), 107–122. https://doi.org/10.1016/j.jbusres.2017.05.022
Aziz, A. S. (2008). Kinerja Organisasi Dinas Pendapatan Daerah Propinsi Daerah Khusus Ibukota Jakarta dengan Pendekatan Systems Thinking dan System Dynamics. Universitas Indonesia.
Baik, B., Farber, D. B., & Lee, S. S. (2011). CEO Ability and Management Earnings Forecasts. Contemporary Accounting Research, 28(5), 1645–1668. https://doi.org/10.1111/j.1911-3846.2011.01091.x
Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, 17(1), 99–120.
Black, B. S., Jang, H., & Kim, W. (2006). Does Corporate Governance Predict Firms’ Market Values? Evidence from Korea. Journal of Law, Economics, and Organization, 22(2), 366–413. https://doi.org/10.1093/jleo/ewj018
Boerner, K., & Hainz, C. (2009). The Political Economy of Corruption and the Role of Economic Opportunities. Economics of Transition, 17(2), 213–240. https://doi.org/10.1111/j.1468-0351.2009.00354.x
Chaney, P. K., Faccio, M., & Parsley, D. (2011). The Quality of Accounting Information in Politically Connected Firms. Journal of Accounting and Economics, 51(1–2), 58–76. https://doi.org/10.1016/j.jacceco.2010.07.003
Chen, M. C., Cheng, S. J., & Hwang, Y. (2005). An Empirical Investigation of the Relationship between Intellectual Capital and Firms’ Market Value and Financial Performance. Journal of Intellectual Capital, 6(2), 159–176. https://doi.org/10.1108/14691930510592771
Crepon, B., Duguet, E., & Mairessec, J. (1998). Research, Innovation and Productivity: An Econometric Analysis at the Firm Level. Economics of Innovation and New Technology, Vol. 7, pp. 115–158. https://doi.org/10.1080/10438599800000031
Darmawan, A., Suharyono, & Iqbal, M. (2015). Pengaruh R&D Expenditure terhadap Penjualan. 2(2), 1–11.
Daud, R. M., & Amri, A. (2008). Pengaruh Intellectual Capital Dan Corporate Social Responsibility terhadap Kinerja Perusahaan (Studi Empiris pada Perusahaan Manufaktur di Bursa Efek Indonesia). Jurnal Telaah Dan Riset Akuntansi, 1(2), 192–213.
Demerjian, P., Lev, B., & McVay, S. (2012). Quantifying Managerial Ability: A New Measure and Validity Tests. Management Science, 58(7), 1229–1248. https://doi.org/10.1287/mnsc.1110.1487
Dreher, A., Kotsogiannis, C., & McCorriston, S. (2007). Corruption around the World: Evidence from a Structural Model. Journal of Comparative Economics, 35(3), 443–466. https://doi.org/10.1016/j.jce.2007.07.001
Faccio, M. (2006). Politically Connected Firms. American Economic Review, 96(1), 369–386. https://doi.org/10.1257/000282806776157704
Faccio, M., Masulis, R. W., & Mcconnell, J. J. (2006). American Finance Association Political Connections and Corporate Bailouts. The Journal of Finance, 61(6), 2597–2635.
Gigante, G. (2013). Intellectual Capital and Bank Performance in Europe. Accounting and Finance Research, 2(4), 120–129. https://doi.org/10.5430/afr.v2n4p120
Gleason, K. I., & Klock, M. (2006). Intangible Capital in the Pharmaceutical and Chemical Industry. Quarterly Review of Economics and Finance, 46(2), 300–314. https://doi.org/10.1016/j.qref.2005.03.001
Górriz, C. G., & Fumás, V. S. (1996). Ownership Structure and Firm Performance: Some Empirical Evidence from Spain. Managerial and Decision Economics, 17(6), 575–586. https://doi.org/10.1002/(SICI)1099-1468(199611)17:6<575::AID-MDE778>3.0.CO;2-N
Hajiheydari, A., Dastgir, M., & Soltani, A. (2011). The Effect of Research and Development Costs on the Profitability of Pharmaceutical Companies. Interdisciplinary Journal of Contemporary Research in Business, 3(No 8), 914–918.
Hall, B. H., Lotti, F., & Mairesse, J. (2013). Evidence on the Impact of R&D and ICT Investments on Innovation and Productivity in Italian Firms. Economics of Innovation and New Technology, 22(3), 300–328. https://doi.org/10.1080/10438599.2012.708134
Hall, R. (1992). The Strategic Analysis of Intangible Issues. Strategic Management Journal, 13(March 1991), 135–144.
Hillman, A. J., & Dalziel, T. (2003). Boards of Directors and Firm Performance: Integrating Agency and Resource Dependence Perspectives. Academy of Management Review, 28(3), 383–396. https://doi.org/10.5465/AMR.2003.10196729
JagelaviÄius, G. (2013). Gross Margin Management Framework for Merchandising Decisions in Companies with Large Assortment of Products. Economics and Management, 18(1), 6–16. https://doi.org/10.5755/j01.em.18.1.4116
Kim, C., & Zhang, L. (2013). Corporate Political Connections and Tax Aggressiveness. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2303836
Leuz, C., & Oberholzer-Gee, F. (2006). Political Relationships, Global Financing, and Corporate Transparency: Evidence from Indonesia. Journal of Financial Economics, 81(2), 411–439. https://doi.org/10.1016/j.jfineco.2005.06.006
Leverty, J. T., & Grace, M. F. (2012). Dupes or Incompetents? An Examination of Management’s Impact on Firm Distress. Journal of Risk and Insurance, 79(3), 751–783. https://doi.org/10.1111/j.1539-6975.2011.01443.x
Lu, Y.-H., Tsai, C.-F., & Yen, D. C. (2010). Discovering Important Factors of Intangible Firm Value by Association Rules. International Journal of Digital Accounting Research, 10, 55–85. https://doi.org/10.4192/1577-8517-v10
Mitchell, H., & Joseph, S. (2010). Changes in Malaysia: Capital Controls, Prime Ministers and Political Connections. Pacific Basin Finance Journal, 18(5), 460–476. https://doi.org/10.1016/j.pacfin.2010.05.002
Murthi, B. P. S., Srinivasan, K., & Kalyanaram, G. (1996). Controlling for Observed and Unobserved Managerial Skills in Determining First-Mover Market Share Advantages. XXXIII(August), 329–336.
Penrose, E. (2009). The Theory of Growth of the Firm, 4th. ed. New York: Oxford University Press.
Pfeffer, J., & Salancik, G. R. (1978). The External Control of Organizations: A Resource Dependence Perspective.
Pulic, A. (1999). Basic Information on VAIC.
Sampurno. (2007). Technological Capability and R&D Strengthening: a Pharmaceutical Industrial Challenge in Indonesian. Majalah Farmasi Indonesia, 18(4), 199–209.
Sari, P. Z. (2016). Determinan Efisiensi Perbankan di Indonesia (DEA Approach). Universitas Brawijaya Malang.
Supatmi, T, S., Saraswati, E., & Purnomosidhi, B. (2019). The Effect of Related Party Transactions on Firm Performance: The Moderating Role of Political Connection in Indonesian Banking. Business: Theory and Practice, 20, 81–92. https://doi.org/10.3846/btp.2019.08
Tao, Q., Sun, Y., Zhu, Y., & Yang, X. (2017). Political Connections and Government Subsidies: Evidence from Financially Distressed Firms in China. Emerging Markets Finance and Trade, 53(8), 1854–1868. https://doi.org/10.1080/1540496X.2017.1332592
Ulum, I. (2007). Pengaruh Intelektual Capital terhadap Kinerja Keuangan Perusahaan Perbankan di Indoneisa. https://doi.org/10.1108/14691930010324188
Verduijn, K. (2013). From Knowledge to Firm Performance: An Empirical Analysis of Intellectual Capital Impact in Polish and Dutch Listed Firms. Management and Business Administration. Central Europe, 21(3), 114–138. https://doi.org/10.7206/mba.ce.2084-3356.75
Villalonga, B., & Amit, R. (2006). How do Family Ownership, Control and Management Affect Firm Value? Journal of Financial Economics, 80(2), 385–417. https://doi.org/10.1016/j.jfineco.2004.12.005
Wardana, D. (2018). Pengaruh Pengeluaran R&D terhadap Financial Sustainability dengan Marketing Performance, Gross Margin, dan Technplogical Performance sebagai Variabel Mediasi. Universitas Brawijaya Malang.
Wernerfelt, B. (1984). Harmonised Implementation of Application-Specific Messages (ASMs). Strategic Management Journal, CINCO (2), 1–12. https://doi.org/10.1002/smj.4250050207
Zhang, D., & Guo, Y. (2019). Financing R&D in Chinese Private Firms: Business Associations or Political Connection? Economic Modelling, 79, 247–261. https://doi.org/10.1016/j.econmod.2018.12.010
Downloads
Additional Files
Submitted
Published
How to Cite
Issue
Section
License
Copyright (c) 2020 The Indonesian Accounting Review
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
