Intellectual Capital Investments and Company’s Profitability: French Context

The purpose of this paper is to investigate the effects of R&D investments on the company profitability, with special focus on the French most innovative companies. The study is divided into three parts aiming to address the three key research questions raised in the study: the first research question examines the influence of R&D investments on company intangible assets; second research question calculates efficiency of capitalized or transformed intangible assets value coming from R&D investments, whereas the third research question examines generated returns on capitalized assets. The method used in this study is the Efficiency of Intellectual Capital (EIC) method developed by Krstić and Bonić (2016). This method investigates the process of Intellectual Capital (IC) value creation within French companies. The study proves that R&D investments influence positively the intangible assets value after a long-term period of investments. After the new intangible assets are created and developed, they positively influence their efficiency, whereas the impact on the company profitability is not determined in the same year. The main research limitations come from the fact that the observed sample of companies is small, and the access to the financial information related to the R&D expenses is limited to the official accounts of companies, whereas companies are not obliged to disclose this information by accounting rules. This study confirms that high-innovative French companies transform long-term R&D investments into concrete intangible assets values. On the practitioners’ side, the study represents a motive for managers to focus more on the investments in IC that will create a concrete value and generate further economic benefits from that value, rather than to concentrate only on short-term improvements of financial performance.