Authors: Manoj sangisetti, Omar Tarzibash, Kalina Merkhail, Merna Alaqrawi
Abstract: This study investigates the impact of research and development (RD) investment on financial performance in U.S. healthcare firms from 2014-2024, with firm size as a moderating variable. Using panel data from 164 publicly listed healthcare companies, financial performance is measured by Return on Assets (ROA) and Return on Equity (ROE), while RD intensity is calculated as RD expenditures divided by total assets. Panel regression analysis, including Pooled OLS, fixed effects, System GMM, and Fama-MacBeth models, reveals that RD investment positively and significantly affects financial performance. The interaction term between RD intensity and firm size is positive and significant, indicating that larger firms more effectively convert RD spending into profitability due to superior resources and commercialization capabilities. Control variables such as leverage, liquidity, tangibility, cash flow, cash holdings, and net working capital consistently influence performance across models. These findings support Resource-Based Theory by demonstrating that RD creates competitive advantage, particularly for larger firms with greater absorptive capacity. The study contributes to healthcare innovation literature by clarifying the RD-performance link and its contingency on organizational scale, offering implications for strategic resource allocation and policy design in innovation-intensive industries.
DOI: http://doi.org/10.5281/zenodo.20506518
