Investigating the Effect of Research and Development Intensity on Firm Profitability with Panel Data Analysis

Since technological advances provide competitive advantage and market success for firms, it has become very important to understand and measure firms' research and development (R&D) activities. Moreover, R&D is the vital determinant of sustaining competitiveness in the global market. At this point, R&D intensity appears as a critical key performance indicator. For this reason, this study aims to examine the effect of R&D intensity on the financial performance of seven firms operating continuously in the Borsa Istanbul (BIST) Technology sector between 2010 and 2023 by using financial ratios obtained from the financial statements of seven firms prepared in accordance with Turkish Accounting Standards (TAS) and Turkish Financial Reporting Standards (TFRS), and determined as a result of the literature review, with the help of panel data analysis. Two models are developed for Return on Assets and Return on Operating Activities. As a result, in the model developed for Return on Assets (Model 1): R&D intensity has a statistically significant and negative effect on the return on assets at the 10% significance level, and in the model developed for Return on Main Activities (Model 2): R&D intensity has a statistically significant and positive effect on operating profitability at 1% significance level.