Do Tax Incentives Increase Firm Innovation? An RD Design for R&amp;D, Patents, and Spillovers

Antoine Dechezleprêtre; Elias Einiö; Ralf Martin; Kieu-Trang Nguyen; John Van Reenen

doi:10.1257/pol.20200739

journal article Nov 01, 2023

Do Tax Incentives Increase Firm Innovation? An RD Design for R&D, Patents, and Spillovers

Antoine Dechezleprêtre

Elias Einiö Ralf Martin Kieu-Trang Nguyen John Van Reenen

American Economic Journal: Economic Policy Vol. 15 No. 4 pp. 486-521 · American Economic Association

View at Publisher Save 10.1257/pol.20200739

Abstract

We present causal evidence of R&D tax incentives’ positive impacts on a firm’s own innovation and that of its technological neighbors. Exploiting a change in size-based eligibility thresholds for R&D tax relief, we implement a Regression Discontinuity Design using administrative data. We find significant effects of tax relief on (quality-adjusted) patenting (and R&D) that persist up to seven years, and evidence of R&D spillovers on the innovation of technologically close firms. We can rule out elasticities of patenting with respect to R&D user cost of under 2 at the 5 percent level and show that our large effects are driven by financially constrained treated firms. (JEL D22, H25, H32, O31, O34)

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References

Details

Published: Nov 01, 2023
Vol/Issue: 15(4)
Pages: 486-521

Authors

A

Antoine Dechezleprêtre

OECD and CEP (email: )

E

Elias Einiö

VATT and CEP (email: )

R

Ralf Martin

Imperial College London and CEP (email: )

K

Kieu-Trang Nguyen

Northwestern University and CEP (email: )

J

John Van Reenen

London School of Economics and MIT (email: )

Cite This Article

Antoine Dechezleprêtre, Elias Einiö, Ralf Martin, et al. (2023). Do Tax Incentives Increase Firm Innovation? An RD Design for R&D, Patents, and Spillovers. American Economic Journal: Economic Policy, 15(4), 486-521. https://doi.org/10.1257/pol.20200739

Do Tax Incentives Increase Firm Innovation? An RD Design for R&amp;D, Patents, and Spillovers

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Do Tax Incentives Increase Firm Innovation? An RD Design for R&D, Patents, and Spillovers