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.