Whang, S W; Flanagan, R and Kim, K P (2025) An analysis of the optimal research and development investment level of contractor using the panel threshold regression model. International Journal of Construction Management, 25(16), pp. 2007-2019. ISSN 1562-3599
Abstract
This study explores the threshold effect between R&D investment and firm performance in the construction industry, focusing on optimizing R&D spending in this capital-intensive sector. Unlike industries with shorter innovation cycles, construction requires long project durations, high costs, and regulatory compliance, making strategic R&D allocation essential. Using the panel threshold regression model (PTRM), the study analyses data from 136 Korean construction firms with over 100 employees and in-house R&D centres. Threshold values of 0.47% for R&D project cost and 2.25% for researcher ratio are identified, beyond which investment efficiency declines. PTRM is suitable for detecting nonlinear effects, though future studies should test alternative models for greater reliability. While firm-specific financial factors are controlled, external influences such as market dynamics and government policies are not considered. A five-year lag is assumed between R&D investment and outcomes, aligning with South Korea's planning norms, but alternative lags are recommended for further study. The findings offer practical insights for SMEs in managing R&D and financial constraints, with relevance extending beyond Korea to developing nations seeking to close technological gaps. Future research should refine sector-specific benchmarks and consider firm size variations for more applicable R&D strategies.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | Korean contractor; panel threshold regression model; R&D investment; threshold impact |
| Index terms: | South Korea, firm performance, efficiency, regression model, future study, duration, construction industry, financial factor, government policy, dynamics, project cost, construction firm, developing nation, strategy, norms, regulatory compliance, variation, research and development |
| Subjects: | environmental policy, public policy, economic analysis, organization, research management, business analysis, Geography, development economics, research design and methodology, project controls, sociology, industry analysis, statistical analysis, systems engineering, management, economics, performance management, contractual condition |
| Topics: | Cost Management, Business Strategy, Research Practice, Governance, International Construction, Contract Administration, Time Control, Geographical Context, Engineering Principles, Sustainability, Quality Management |
| Descriptive scope: | 4 PCTA |
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