R&D Investment that enhances IT Firm Survival

IT industry is a research-intensive industry. IT firms focus on advanced research activities to stay relevant. Their survival depends on value creations from innovations based on the research. Source of fund to these innovation-related activities are commonly expressed in terms of R&D investment. However, this investment is not the direct indicator of innovation outcome, which impacts firm’s survival. This is the gap between R&D investment and survivability of the firm. To narrow the gap, innovation process and value creation have been focuses of firm’s innovation literature. The literature has narrowed the gap, but uncertainty still largely exists. Both researchers and practitioners often classified R&D investment as a risky investment. This study continues this line of conversation and offers empirical evidence suggesting that R&D investment could be risk mitigator rather than risk enhancer. Data of 2,087 firm-years in IT industry revealed that successful IT firms may invest in R&D to mitigate innovation-related competitive risks. When risk is under control, survivability of the firm increases. IT firm should, therefore, prioritize R&D investment for innovations and products that mitigate competitive risks. This insight is particularly relevant to post CoVID-19 pandemic world because the survival of IT firms depends on how they perceive risks associated with the new-normal world and how they innovate to mitigate those risks.