Transforming firm innovation: International evidence on consumption tax adoption

Chen Lin, Lai Wei and Ying Xu

Finance Research Letters, 2023, vol. 56, issue C

Abstract: This study examines the effect of consumption tax adoption on firm innovation. Using a cross-country sample from 1990 to 2015, we find that firms decrease their innovation intensity but manage to maintain their innovation quality following the tax adoption. Further analyses reveal that firms primarily decrease low-quality innovation in response to the decrease in consumer demand following the tax adoption. They also exhibit higher originality and explore a broader set of new knowledge during innovation, which helps differentiate their products to compete for customers. However, we find that firms’ ability to transform innovation strategies depends on their pre-existing financial capability.

Keywords: Corporate innovation; Corporate transformation; Innovation strategies; Consumption tax; Consumer demand (search for similar items in EconPapers)
JEL-codes: H20 H23 O30 O31 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612323005093
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323005093

DOI: 10.1016/j.frl.2023.104137

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().