Firm-Level and Macroeconomic Determinants of R&D Investments in Turkey

Abstract

Purpose – The purpose of this study is to examine firm-level and macroeconomic determinants of R&D investments in Turkey. Design/Methodology/Approach – This study employs two groups of variables to explain R&D investments of publicly traded firms in Turkey. The first group contains firm-level financial indicators, containing liquidity, profitability, tangibility, productivity and financial leverage. The second group includes macroeconomic variables such as inflation rates, industrial production, economic growth, foreign trade and foreign direct investments. To exhibit the impact of two groups of factors, this study applies two panel data regression models. Findings – The findings indicate that macroeconomic variables do not explain firm-level R&D investments. The only significant variable is inflation rates, which have an adverse effect on R&D decisions. On the other hand, firm-level financial variables explain the variation in R&D investments quite well. Liquidity and financial leverage significantly and positively influence innovation and research while profitability has a negative impact on them. Discussion – The results indicate that firm-level R&D expenditures are mostly robust to macroeconomic conditions, while internal determinants are more significant in explaining R&D behavior.