Determinants and persistence of research and development investments: Evidence from Malaysia

Purpose – The purpose of this paper is to investigate the determinants and persistence of research and development (R&D) investments in Malaysia. Design/methodology/approach – The approach involves a regression analysis. Findings – The regression analysis shows that lagged absorbed slack defined as the ratio of selling and administrative expenses to total sales and sales growth have positive affect on the R&D expenses, whereas diversification has negative impact on R&D expenses after controlling for leverage and profitability of the firms. Persistence in the firmlevel R&D expenses is found. Occasional tendency among firms to cut down R&D spending over the period of 20002005 is found. Research limitations/implications – Sample size is a limitation. Practical implications – The findings have implications for the corporate governance and innovation charter of the firms. Originality/value – The paper provides useful information from Malaysia regarding the determinants and persistence of R&D investments.