R&D investment and performance nexus of African firms: Under the three stages sigmoid curve model

Abstract

This study examines the R&D investment and firm performance nexus under a three-stage sigmoid model on 923 firms in ten African countries. I applied a two-step system GMM, robust OLS, Fixed and Random Effect regression models to check the sensitivity of the assumption of the sigmoid model to different regression approaches, and the result proves it. This study demonstrates a three-stage sigmoid model. There exists a signficant negative relationship between underinvestment and firm performance (stage 1), a significant positive relationship between optimum investment and firm performance (stage 2), and a signficant negative relationship between overinvestment and firm performance (stage 3). It suggested that African firms should maintain optimum investment in their R&D projects to maintain positive profit.