2026-09-20T23:49:28Zhttps://dspace.mit.edu/server/oai/requestoai:dspace.mit.edu:1721.1/778222022-01-13T07:54:52Zcom_1721.1_7582com_1721.1_7581col_1721.1_131022
John Core and Joseph Weber.
Li, Lei (Lynn Lei)
Sloan School of Management.
Sloan School of Management
2013-03-13T15:51:17Z
2013-03-13T15:51:17Z
2012
2012
http://hdl.handle.net/1721.1/77822
828430636
Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, 2012.
Cataloged from PDF version of thesis.
Includes bibliographical references (p. 48-51).
This paper examines whether a change in the accounting rule for research and development (R&D) cost is associated with changes in the innovation process. Specifically, I examine whether R&D expenditure, the number of patents per R&D dollar, and the number of citations per R&D dollar differ for firms that capitalize their R&D (capitalizers) relative to those that expense their R&D (expensers) after the issuance of Statement of Financial Accounting Standard (SFAS) 86, Accounting for the Cost of Computer Software to be Sold, Leased, or Otherwise Marketed. I find that relative to expensers, capitalizers increase their R&D expenditure post-SFAS 86. In addition, I find that the quality of innovation declines: post- SFAS 86, the total number of patent citations per R&D dollar decreases more for capitalizers than it does for expensers. This decline is consistent with managers of capitalizing firms taking advantage of SFAS 86 by over-investing in poor quality projects. Overall, the paper provides evidence that financial reporting can impact investments in innovation.
by Lei Li.
Ph.D.
77 p.
eng
Massachusetts Institute of Technology
M.I.T. theses are protected by
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http://dspace.mit.edu/handle/1721.1/7582
Sloan School of Management.
The impact of accounting for research and development on innovation
Thesis
application/pdf
false
Publication
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<Abstract>This paper examines whether a change in the accounting rule for research and development (R&D) cost is associated with changes in the innovation process. Specifically, I examine whether R&D expenditure, the number of patents per R&D dollar, and the number of citations per R&D dollar differ for firms that capitalize their R&D (capitalizers) relative to those that expense their R&D (expensers) after the issuance of Statement of Financial Accounting Standard (SFAS) 86, Accounting for the Cost of Computer Software to be Sold, Leased, or Otherwise Marketed. I find that relative to expensers, capitalizers increase their R&D expenditure post-SFAS 86. In addition, I find that the quality of innovation declines: post- SFAS 86, the total number of patent citations per R&D dollar decreases more for capitalizers than it does for expensers. This decline is consistent with managers of capitalizing firms taking advantage of SFAS 86 by over-investing in poor quality projects. Overall, the paper provides evidence that financial reporting can impact investments in innovation.</Abstract>
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