EFFECTS OF PROFITABILITY AND LIQUIDITY ON RESEARCH-AND-DEVELOPMENT INTENSITY - JAPANESE AND US COMPANIES COMPARED

This study investigates the proposition that Japanese companies have a greater propensity than U.S. companies to sustain commitment to R&D i n the face of fluctuating profits and liquidity. The analysis showed t hat profitability declines led to increased R&D intensity in Japan. Th ese effects were not confined to members of Japanese financial keirets u, or industrial groups. The R&D intensity of U.S. companies fluctuate d directly with two-year lagged profitability and liquidity variables, but these relationships might have been confined to more research-int ensive companies.