Tech Stock Valuation

REFERENCES 155

some prior evidence, size advantages appear to influence the generally positive

effects of R&D intensity on Tobin’s q. For both manufacturing and nonmanufac-

turing firms, the market-value effect of a dollar in R&D spending tends to be

greater for relatively larger firms. In a new finding, consistent differences in the

market-value effects of R&D intensity are noted across all firm size classes

according to the amount of firm stock held by institutional investors. In each size

class, the generally positive influence of R&D intensity on Tobin’s q increases

with the level of institutional stock ownership. This result lends support to the

hypothesis ...