R&D tax credits, technology spillovers, and firms' product convergence

Seong K. Byun, Jong-Min Oh and Han Xia

Journal of Corporate Finance, 2023, vol. 80, issue C

Abstract: Using a difference-in-differences (DiD) setting that leverages the staggered adoption of R&D tax credits across the U.S. states, we show that after a firm receives the tax credits, products of its peers become significantly more similar to the recipient firm. Such product convergence is particularly strong when peer firms face greater pressure from market participants to uphold short-term performances. We further show that the effect of R&D tax credits likely works through the increased technology spillovers, which motivate peers to imitate instead of differentiating. Accordingly, we show that peer firms shift their patent composition from breakthrough to incremental innovations following the R&D tax subsidy.

Keywords: R&D tax credits; Product offering strategies; Technology spillovers (search for similar items in EconPapers)
JEL-codes: G28 G32 O32 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:80:y:2023:i:c:s0929119923000561

DOI: 10.1016/j.jcorpfin.2023.102407

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