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Agency theory and the context for R&D investment: Evidence from Korea

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Abstract

Pitting the theoretical assumptions of agency theory against the characteristic governance mechanisms of a state-coordinated market economy, this study examines the effects of financial structure, ownership formation and ownership identity on corporate R&D investment. Using panel data on 100 large listed Korean firms, the study provides evidence that market-based governance mechanisms facilitate R&D investment. However, the findings also indicate that the idiosyncratic organizational characteristics of a society, such as business-group affiliation and state ownership in Korea, are not active in dividend payout and are positively related to R&D investment. This suggests that strategic management of changes in corporate governance requires contextual understanding of the two contrasting governance rationales.

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Acknowledgements

This work was supported by a Hankuk University of Foreign Studies Research Fund of 2012 and by a National Research Foundation of Korea Grant funded by the Korean Government (NRF-2010-330-B00100). We thank Sanghoon Lee for data collection and inputs on the draft.

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  1. College of Business Administration, Hankuk University of Foreign Studies, Seoul, South Korea

    Taeyoung Yoo

  2. Shidler College of Business, University of Hawaii, 2404 Maile Way, Honolulu, 96822, HI, USA

    Mooweon Rhee

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  1. Taeyoung Yoo
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Correspondence to Mooweon Rhee.

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Yoo, T., Rhee, M. Agency theory and the context for R&D investment: Evidence from Korea. Asian Bus Manage 12, 227–252 (2013). https://doi.org/10.1057/abm.2013.2

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