Does Spending Big on Research Pay Off for Tech Companies? Not Really.

Tech companies want to be perceived as innovators. But what’s the best indication of that status? To shareholders, it’s often the company’s research and development budget: The bigger the budget, the more innovative and successful the company — or so the conventional wisdom goes.

But a new report from Bernstein Research analyst Toni Sacconaghi suggests the opposite.

Sacconaghi looked back at historical R&D spending figures as a percentage of sales for publicly traded tech companies with market caps of $2 billion or more going back to 1977, and broke them into three groups based on how much they spent on R&D as a percentage of revenue: Big spenders, medium spenders and low spenders.

The result: Companies that spent the most on R&D tended to have shares that underperformed the markets over time, and also relative to those companies that spent less.

Sacconaghi applied the same analysis to 68 large-cap tech companies over five years ending in June of 2011. In that batch of companies, those that spent the most on R&D relative to sales saw an average decline of 26 percent in their share prices at the five-year mark. Those that spent the least did better, seeing an average improvement in their share prices of 17 percent after five years.

As you can see from the screen-grabbed table from Sacconaghi’s report below (click to embiggen), there are some familiar names in surprising places on the list. Commodity technology suppliers like chipmakers SanDisk and Micron Technology spent less than nine percent of sales on R&D over five years but saw their shares skyrocket almost 300 percent. The result was similar with hard drive manufacturers Western Digital and Seagate. Apple was on the list, too, spending only 2.4 percent of revenue on R&D at a time when its shares outperformed others on the list by about 45 percent.

As for companies that spent more of their resources on R&D, the results were consistent across big- and medium-spenders: Their shares, on average, tended to lag. Among them were networking company Juniper Networks, software concern VMware and chipmaker Advanced Micro Devices, all of which underperformed by an average of 26 percent. Similarly, those in the middle cohort, including software giant Oracle and enterprise storage players EMC and NetApp, fell by an average of 15 percent.

There were notable exceptions in all three lists: BlackBerry shares performed the worst among the entire group, falling 113 percent and dragging down the average performance of the low-spending group. There were also high performers among the big- and medium-spenders, among them Yahoo, Google, Adobe and Salesforce.com.

So what’s it all mean? For one thing, R&D spending is a bad predictor of future stock performance. R&D, Sacconaghi hypothesizes, is a “scale game,” meaning that smaller players have to spend more of their resources to compete with larger players. But more important than the spending levels are the results of the research. Any company can spend big on research that comes to naught, and some are simply better at it than others. Apple is the prime example of a company that spends less on R&D — historically about two percent of sales — but which has tended to enjoy a big bang for its research buck.

Finally, Sacconaghi found that what correlations there are between R&D spending and stock performance are unique to the tech sector. He found, he writes, “no meaningful relationship between R&D spending and stock performance” across the universe of companies traded on the S&P 500 between 1977 and 2014.

This article originally appeared on Recode.net.