Abstract

This research is broadly concerned with describing the current practices related to the adoption of control and reward systems based on measures of shareholder value, and narrowly concerned with the effects of such adoption on firm investment in R&D. The acronym, SVM, is coined to refer generally to all control and reward systems that utilize a shareholder value metric, defined as a metric that simultaneously measures operating performance and capital utilization. The study develops a theoretical model that integrates behavioral perspectives on risk with classic agency theory, and leads to a series of six hypothesized relationships about the firm's resource allocation to R&D, and the R&D portfolio balance between research spending and development spending. It uses primary data to operationalize adoption of shareholder value metric systems has a positive influence on resource allocation to R&D particularly as such systems are adopted at successively lower organizational levels. Additionally, the study provides descriptive evidence regarding the prevalence of shareholder value metric (SVM) systems as well as the implementation of specific adoption practices.


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gallagher_0100.pdf