The Moderating Role of Employee Skill on the Relationship between R&D Intensity and Firm Performance

Abstract: This paper investigates the moderating effect of employee skill, as measured by employee productivity and training, on the relationship between R&D spending, measured as R&D intensity, and firm performance, measured as ROA, for the accounting-based standard, and market capitalization, for the market-based standard. The study employs a hierarchical Pooled OLS logistic regression and a Fixed Effects regression model, to account for the structure of the panel data. It investigates a sample of firms on the S&P 1500 Composite Index, excluding non-financial firms. The investigation reveals a positive relationship between R&D Intensity and Market Capitalization and a negative relationship between R&D Intensity and ROA. While finding a positive moderating effect on both Employee Productivity and Training. However, when employing the Fixed Effects model, the relationship between R&D Intensity and Market Capitalization is found to be insignificant, as is the moderating effect of Employee Productivity, when using Market Capitalization as a dependent variable.