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.