Hyesoo Ko, Yanghon Chung (KAIST) & Chungwon Woo (corresponding author) Korean Accounting Review, 47(3), 183–204, 2022 · DOI: 10.24056/KAR.2022.06.006 · Written in English, published in Korea's premier accounting journal
TL;DR — Using Korean Innovation Survey manufacturing data, firms implementing innovation exhibit greater cost stickiness than non-innovators. The resource retention occurs mainly in pessimistic situations — managers hold slack resources to protect the innovation process through downturns — and product vs. process innovation lead to different resource-commitment decisions.
Key findings
1. Innovation strategy shows up in cost behavior. Innovating firms cut costs less when sales fall (greater SG&A stickiness) — cost behavior reveals managerial decisions that are not separately disclosed.
2. Retention is deliberate, not slack mismanagement. Resource reservation concentrates in pessimistic conditions, consistent with managers using innovation to overcome unfavorable circumstances and expecting sales rebounds.
3. Product ≠ process innovation. The two innovation types drive different resource-commitment patterns, so strategy mix matters for predicting a firm's cost structure.
Method in one line
Anderson–Banker–Janakiraman (ABJ)-style asymmetric cost models estimated on Korean manufacturing firms from the Korean Innovation Survey, comparing innovators vs. non-innovators and product vs. process innovation.
국문 요약
한국혁신조사(KIS) 제조기업 자료로 혁신을 수행하는 기업일수록 원가의 하방경직성(cost stickiness)이 크다는 것을 실증. 자원 유보는 주로 비관적 상황에서 발생 — 경영자가 혁신 프로세스를 지키기 위해 매출 감소에도 자원을 의도적으로 보유한다는 의미다. 제품혁신과 공정혁신은 서로 다른 자원투입 의사결정으로 이어진다. 회계학연구(한국 회계학 최고 권위지) 게재 영문 논문.
FAQ
Q. What is cost stickiness? Costs fall less when sales decrease than they rise when sales increase by the same amount — because managers hold resources instead of cutting them, anticipating future rebounds (Anderson, Banker & Janakiraman, 2003 lineage).
Q. What does this add to the cost stickiness literature? It links cost asymmetry to innovation strategy — a core strategic choice — and separates product vs. process innovation effects, using direct survey-based innovation measures rather than R&D spending proxies.
Q. Related work by the authors? Ko, Chung & Woo (2021, TASM) shows R&D investment amplifies SG&A cost asymmetry, and that capitalized vs. expensed R&D behave differently.
How to cite
APA: Ko, H., Chung, Y., & Woo, C. (2022). Innovation and asymmetric cost behavior. Korean Accounting Review, 47(3), 183–204. https://doi.org/10.24056/KAR.2022.06.006
BibTeX:
@article{ko2022innovation,
title={Innovation and Asymmetric Cost Behavior},
author={Ko, Hyesoo and Chung, Yanghon and Woo, Chungwon},
journal={Korean Accounting Review},
volume={47}, number={3}, pages={183--204}, year={2022},
doi={10.24056/KAR.2022.06.006}}