The Relationship between R&D Investment, Strategic Evolution and Firm Performance in the Automotive Industry

Abstract: The purpose of this study is to investigate the relationship between R&D investment and strategy on firm performance for two automotive firms—Renault and BMW. This research was selected to explore the relatively undiscovered area of R&D expenditures and strategy as crucial determinants of firm performance. A mixed-method case study with a deductive research approach was chosen. The results reveal a statistically insignificant relationship between R&D investment and strategy on firm performance. We found that strategy resulting from management decisions forms the unseen, yet vital factor that affects how a firm performs. Despite statistical insignificance, the results display unique findings; the examined firms increased their R&D investments and performance while pursuing a Product-focus strategy. It was concluded that the relationship between R&D investment and strategy on firm performance is rather complex and vulnerable to many internal and external influences. Trends identified may be used to outline how a relationship could look like if the study scope were widened.