Research and development and the financial performance of high-tech small- and medium-sized enterprises: Does managerial ability matter?

Abstract

High-tech small- and medium-sized enterprises (SMEs) need to innovate and invest in research and development (R&D) activities to remain competitive. However, due to their liability of smallness, the returns from R&D in terms of financial performance may not be as expected in such firms. Combining the resource management perspective with managerial ability research, we elaborate upon how managerial ability influences the effect of R&D on the financial performance of high-tech SMEs. We also investigate how this moderation is affected by the external environment in which high-tech SMEs operate. Using a moderated moderating model and the panel data of 256 Chinese high-tech SMEs from 2007 to 2019, we find that managerial ability strengthens the impact of R&D on the financial performance of high-tech SMEs. This moderating effect is more pronounced during the economic downturn and in regions with better digital economy development. Our findings provide important implications for high-tech SMEs on their R&D strategies and human capital management as well as the government.