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Open AccessArticle

Asymmetric Cost Behavior and Investment in R&D: Evidence from China’s Manufacturing Listed Companies

1
The School of Business, East China University of Political Science and Law, Shanghai 201620, China
2
School of Finance, Zhongnan University of Economics and Law, Wuhan 430073, China
3
The School of Economics, Fudan University, Shanghai 200433, China
4
Wenlan School of Business, Zhongnan University of Economics and Law, Wuhan 430073, China
*
Author to whom correspondence should be addressed.
Sustainability 2019, 11(6), 1785; https://doi.org/10.3390/su11061785
Received: 31 January 2019 / Revised: 1 March 2019 / Accepted: 18 March 2019 / Published: 25 March 2019
(This article belongs to the Special Issue Sustainable Financial Markets)
Asymmetric cost behavior or stickiness has drawn attention in recent years. Although studies have focused on the causes of and factors contributing to cost stickiness, few have investigated its economic consequences. This paper empirically examines how firms’ asymmetric behavior influences their research and development (R&D) investment. Because cost stickiness increases innovation failure cost, we expect cost stickiness to reduce R&D expenditure. By using data from Chinese listed manufacturing firms between 2007 and 2015, we empirically test and confirm this hypothesis. On average, with one standard deviation added to the mean, R&D expenditure over total asset and that over total sales are reduced by 2.7% and 2.2%, respectively. Furthermore, the dampening effect of cost stickiness on R&D investment becomes more prominent with increasing risks faced by firms. Only SG&A cost stickiness exerts a dampening effect on R&D, whereas cost of goods sold (COGS) and total cost stickiness demonstrate no significant effects. View Full-Text
Keywords: sticky cost; R&D investment; economic consequence; risk sticky cost; R&D investment; economic consequence; risk
MDPI and ACS Style

Sun, R.; Ho, K.-C.; Gu, Y.; Chen, C.-C. Asymmetric Cost Behavior and Investment in R&D: Evidence from China’s Manufacturing Listed Companies. Sustainability 2019, 11, 1785.

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