Date of Award

Fall 12-10-2016

Degree Type


Degree Name

Executive Doctorate in Business (EDB)



First Advisor

Dr. Conrad Ciccotello (Chair)

Second Advisor

Dr. Felix Rioja

Third Advisor

Dr. Craig Ruff


Many top market capitalization companies are information technology (IT) firms, including Apple, Google, Microsoft, and Facebook, each of which is valued at more than $300 billion. Facebook is less than 10 years old and is one of the top 10 companies in the world in terms of market capitalization. However, technologies change rapidly; website revenue—which once grew at a brisk rate—has slowed down, while mobile technology growth is increasing and technology trends are shifting toward cloud hosting and big data analytics. IT companies that have increased their R&D spending remain leaders throughout periods of technology change. Companies such as Facebook and Google have doubled and tripled their profits, respectively over` the past decade. In this dynamic environment, analysts play a critical role in evaluating IT company financial statements and estimating company sales and earnings per share (EPS). This study examines how changes in R&D spending are related to analysts’ sales and earnings estimate revisions. An analysis of data over a 20-year period shows that analysts typically revise their sales estimates based on changes in a company’s R&D expenditures. The correlation between analyst earnings estimates and R&D expenditures, however, varies based on company size and industry within the IT sector. Analysts play a particularly important role in small companies, where the correlation between R&D and sales changes is not as high as in large companies. Analysts are thus critical to the functioning of capital markets in the IT sector.