Strategic control systems and relative r&d investment in large multiproduct firms
Article first published online: 8 NOV 2006
Copyright © 1988 John Wiley & Sons, Ltd.
Strategic Management Journal
Volume 9, Issue 6, pages 605–621, November/December 1988
How to Cite
Hoskisson, R. E. and Hitt, M. A. (1988), Strategic control systems and relative r&d investment in large multiproduct firms. Strat. Mgmt. J., 9: 605–621. doi: 10.1002/smj.4250090607
- Issue published online: 8 NOV 2006
- Article first published online: 8 NOV 2006
- Manuscript Revised: 18 JAN 1988
- Manuscript Received: 9 JAN 1987
This paper hypothesizes that tight financial controls associated with large diversified M-form firms lead to a short-term, low-risk orientation and thereby lower relative investment in R&D. Further, it is hypothesized that increasing levels of diversification require different control systems which have significant implications for investing in R&D. Results of the study of 124 major U.S. firms suggest that less diversified U-form firms invest more heavily in R&D than more diversified M-form firms after controlling for size and industry effects. Additionally, dominant business firms invested more in R&D than either related or unrelated business firms. Finally, the relationship between R&D intensity and market performance was negative for related and unrelated firms. The findings suggest that the market evaluates R&D investment more positively for firms that are organized to seek synergy than for those that are organized to pursue a hedging (or diversification) strategy.