R&D Investment in Times of Crisis: The Enabling Role of Operational Excellence

Abstract: This study examines when and why R&D investments lead to improved performance during times of crisis, with a focus on the enabling role of operational management. While classic economic theory advises firms to defer irreversible investments under uncertainty, we adopt a contingency perspective grounded in operations and innovation management. We argue that R&D can contribute to superior performance during crises, but only when supported by strong operational capabilities. Using a panel of S&P 500 firms from 2016 to 2024, we focus specifically on the crisis period spanning 2020–2021, marked by the COVID-19 pandemic. We analyze how the interaction between R&D intensity and operational excellence – measured by Return on Average Assets (ROAA) – shapes gross margin outcomes. The results reveal that during crisis periods, firms with high ROAA were significantly more likely to translate R&D investment into performance gains. In contrast, during stable years, operational capabilities had no significant moderating effect. These findings suggest that the effectiveness of innovation is contingent on a firm’s executional strength under pressure. By integrating perspectives from crisis management, innovation strategy and operations, this study contributes to a deeper understanding of how firms can convert innovation into performance when it matters most. We highlight the critical role of operational alignment in enabling innovation-driven resilience during periods of disruption. The results carry significant implications for managers, scholars and stakeholders.