In this paper we investigate the effect of intangible resources on the relationship between activities and SG&A costs, and examine this effect on young and established firms. Prior research shows that costs are sticky in that costs decrease to a lesser extent following decrease in activities than they do increase following increase in activities of the same magnitude. We hypothesize that firms relying on intangible resources will exhibit stronger sticky cost behavior because (i) intangible resources are strategic resources and (ii) they possess unique properties that constrain managers’ ability to selectively cut resources. Using a large sample of US firms, we show that costs are more sticky with increase in intangibles. We also show that the effect of intangibles on cost behavior is present only among young firms. These results are consistent with the notion that managers of young firms focus on building capacity, learning, and maintaining flexibilities whereas managers of established firms focus on efficiency.
Sallehu, M., I. Chiou, and Y. Liu. 2023. The Effect of Intangible Resources on Selling, General, and Administrative Cost Behavior of Young and Established Firms. The North American Accounting Studies 6 (1): 1-25.