Unlocking R&D potential with digital transformation: Evidence from listed companies in Vietnam

Abstract

This study examines the impact of investment in research and development (R&D) on firm performance while highlighting the moderating role of digital transformation in this relationship. Using a dataset of 2,115 observations from 220 non-financial firms listed on the Vietnamese stock exchange from 2014 to 2023, the study employs fixed-effects regression, random-effects regression, and two-stage least squares (2SLS) regression to assess the effects of R&D expenditure and the level of digital transformation on two key performance metrics: ROA and firm market value (Tobin’s Q). The results indicate that R&D investment positively impacts the long-term value of firms (Tobin’s Q), but its effect on ROA is inconsistent. Notably, digital transformation not only directly enhances firm performance but also plays a crucial role in strengthening the relationship between R&D investment and business outcomes. This study contributes to a deeper understanding of the supportive role of digital transformation in maximizing the effectiveness of R&D investments, particularly in emerging markets like Vietnam, where corporate resources are limited and digital transformation levels vary significantly. The practical contributions of this research include strategic recommendations to help firms optimize R&D investments and leverage digital transformation to build sustainable competitive advantages