The mediating effects of research and development and advertising expenditures on the relationship between free cash flow and sales: A dynamic perspective
South African Journal of Business Management
| Field | Value | |
| Title | The mediating effects of research and development and advertising expenditures on the relationship between free cash flow and sales: A dynamic perspective | |
| Creator | Cheng, Jo-Han Ding, Cherng G. Chang, Yen-Wei Chan, Yuan-Yuan | |
| Description | Purpose: The purpose of this study is to discuss the mediating effects of research and development (RD) and advertising expenditures on the relationship between free cash flow (FCF) and sales from a dynamic perspective.Design/methodology/approach: Drawing upon the resource-based and knowledge-based views, we propose a dynamic model, in which FCF change positively affects RD expenditure change and advertising expenditure change, which in turn positively affect sales change, and the effect of FCF change on RD expenditure change is moderated by industry type (high-tech vs. non-high-tech). To test for the dynamic mediating effects, we use a two-step approach that incorporates growth modelling and structural equation modelling, utilising longitudinal financial data.Findings/results: Research and development and advertising expenditure changes mediate the relationship between prior FCF change and subsequent sales change, with RD expenditure change having a stronger dynamic mediating effect for high-tech firms.Practical implications: As FCF increases, managers should allocate a proportionate share of the incremental resources to RD and advertising. High-tech firms should be particularly attentive to the need for allocation to RD. Short-term gains should not come at the expense of long-term value creation. Businesses should establish mechanisms for continuous monitoring and adaptation.Originality/value: The results spotlight the mechanism of dynamic mediation of RD and advertising expenditures on the relationship between FCF and sales and the moderating role of industry type on the dynamic mediation of RD expenditures. This study enhances our understanding of dynamic mediation in the context of strategic investments. | |
| Publisher | AOSIS | |
| Date | 2026-02-11 | |
| Identifier | 10.4102/sajbm.v57i1.5229 | |
| Source | South African Journal of Business Management; Vol 57, No 1 (2026); 11 pages 2078-5976 2078-5585 | |
| Language | eng | |
| Relation |
The following web links (URLs) may trigger a file download or direct you to an alternative webpage to gain access to a publication file format of the published article:
https://sajbm.org/index.php/sajbm/article/view/5229/3620
https://sajbm.org/index.php/sajbm/article/view/5229/3621
https://sajbm.org/index.php/sajbm/article/view/5229/3622
https://sajbm.org/index.php/sajbm/article/view/5229/3623
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