University of Westminster

WESTMINSTER INTERNATIONAL UNIVERSITY IN TASHKENT 

5 

001023, 00953, 000933, 001012 

analysis on a sample that includes 1,020 Indian firms to find out if the firm age and size had any effect on 

firms’ profitability and productivity. The results showed that older firms were more productive than younger 

ones however, they were less profitable. The author also mentioned that the relationship between age and 

productivity is environment-specific and affected by many institutional factors. Therefore, it can only be 

analyzed within the institutional framework that firms operate (Majumdar, 1997). Contrary to that, some 

researchers argue that the relationship between age and firm growth is negative. Especially, in developed 

countries this relationship is significant. An empirical evidence from Africa and Latin America shows that in 

case of small and micro firms younger firms grow faster than the older ones (Mead & Liedholm, 1998; Parker, 

1995). Heshmati (2001) also supports this view in his paper on the growth of MSF in Sweden and concludes 

that older firms experience lower rate of growth when you look at the employment as the firm growth factor. 

However, older firms show higher growth rate in assets and sales (Heshmati, 2001).  

 

 

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:  firm’s age has positive impact on firm’s sales growth 

 

R&D 

According to Boulding and Staelin (1986), spending on R&D has a significant impact on a firm’s intangible 

assets such as marketing, management and finance. Moreover, expenditure on R&D mainly illustrates high-

level of profits, consequently comparable market value and high stock returns. Leigh McAlister, Raji 

Srinivasan, & MinChung Kim (2015) mentioned that investment made on advertising and R&D keep a firm 

from stock market changes to avoid systematic risk. Franko (1989) compared companies in major industries all 

over the world. Firms invested on R&D had a relatively positive consequence in long-term while firms with 

lower investment on R&D lost world market value. 

 

Organizational culture that stimulate innovations may suffer from poor  R&D process because owners may 

decide to change funds to another aspect (Burgelman 1986). However, Hitt et.al (1991) mentioned that there is 

a risk that R&D investment is not predictable at initial stage of the process. An investment in intangible assets 

is subject to more financial constrains as there is no guarantee for a return from the investment made compared 

to the investment in fixed assets. In addition, some firms may hire experts from outside of the company and this 

may result in the leakage of information out of the firm to current or potential competitors  (Stephen Bond, 

Dietmar Harhoff, 2014). 

 

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: Firm’s spending on R&D has positive impact on its sales