How Short-term Pressures Shape R&D Strategies

This study explores how financial market pressures influence companies' R&D strategies. Using a European regulatory change as a quasi-experimental setting, the research highlights two key effects:

1. For firms with low R&D productivity: These companies tend to cut back on R&D spending when faced with increased market scrutiny. 

2. For firms with high R&D productivity: Instead of reducing R&D budgets, these firms shift their focus to safer, less distant innovation projects that promise quicker returns. 

In essence, the study reveals that market pressure can both streamline inefficient spending and encourage short-sighted decision-making, depending on a firm's existing R&D capabilities.