Economic and financial theory argues that a firm's market value (M) deviates from its book value (B) by the present value of future abnormal earnings, and that the generation of abnormal earnings results from the capitalization of a firm's monopoly power or frequent corporate innovation. Based on this perspective, this study empirically analyzes whether the book-to-market (B/M) effect can be explained by the corporate innovation capital variable, which has been proposed as a cause of cross-sectional differences in B/M ratios. This study specifically uses firms' R&D expenditure information as a proxy variable for corporate innovation capital. The main conclusions of this study are as follows. (1) Even after controlling for other fundamental variables (size, B/M, leverage, etc.), the capitalized value of R&D has a statistically significant association with stock returns. (2) The R&D effect substitutes for the B/M effect in R&D-intensive firms. That is, when the RDCM variable is included in the regression equation for these firms, B/M no longer has an association with stock returns. (3) In the case of Korea, the association between RDCM and stock returns partially arises from risk factors related to R&D. Overall, the findings of this study provide an alternative interpretation of the B/M effect that occurs in R&D-intensive firms, at least in very rapidly growing economic environments.