THE ROLE OF RESEARCH & DEVELOPMENT IN SHAPING FIRM PERFORMANCE: EVIDENCE FROM PAKISTANI TEXTILE INDUSTRY

Abstract

Innovations boost competitiveness and economic growth, especially in developing countries like Pakistan. Despite the recognition of research and development (R&D), its impact on the advancement of textile companies in Pakistan is largely unexplored. This study examines research and development spending and business performance in Pakistan's textile industry. The study used regression analysis to calculate the return on assets (ROA) for 55 textile manufacturers listed on the Pakistan Stock Exchange (PSX) between 2010 and 2018. Research and development (R&D) investment significantly improves company performance, benefiting emerging firms more than their established counterparts. However, larger companies show lower profitability, possibly due to inefficiencies. The results offer policymakers insights to promote innovation and support smaller businesses in driving growth in emerging markets.