Research and development intensity, inventory leanness, and firm performance

Abstract

This study investigates whether a firm’s research and development (R&D) intensity influences its choice of an inventory leanness strategy and how R&D intensity and inventory leanness collectively impact its performance. This study documents two findings in a dataset comprising 43,634 observations within the U.S. manufacturing sector from 1992 to 2019. Firstly, higher R&D intensity is associated with an increased likelihood of implementing an inventory leanness strategy. Secondly, adopting such a strategy helps firms mitigate the adverse effects of R&D spending on financial performance and generate additional market value. The results imply that managers in firms with high R&D spending strategically adopt inventory leanness to navigate uncertainties associated with realizing returns from their innovation activities.

Keywords Cost savings, Efficiency, Financial performance, Innovation, Lean strategy, Market performance, R&D