Does R&D create additional business value through IT?

Purpose-R&D indicates absorptive capacity, which may affect IT payoff. The purpose of this paper is to examine how R&D investment affects the relation between IT investment and firm performance and under what circumstances R&D intensity is more beneficial to IT returns. Such study has been lacking in R&D research and IT payoff literature. Design/methodology/approach-A conceptual model for linking IT investment, R&D investment, environmental dynamism and firm performance was developed and tested by data collected from Chinese listed firms from 2007 to 2013, using fixed effects regression model. Findings-The results show positive moderating effects of firm R&D investment and government R&D subsidies on the relation between IT investment and firm performance. Furthermore, the impact of firm R&D investment on IT payoff is stronger for firms in more dynamic environments. The findings suggest that R&D investment creates additional business value through interactions with IT, and complementarities between R&D and IT, as manifested in their interaction effect on firm performance vary across industry sectors. Research limitations/implications-This paper indicates the importance of complementarities between R&D and IT, which should prove helpful to researchers and practitioners engaged in Chinese business. Originality/value-This paper presents one of the first attempts at examining the moderating effect of R&D investment on the relation between IT investment and firm performance. Especially this study helps to understand under what circumstances R&D investment is more or less likely to be beneficial to IT returns.