Cross-border effects of R&D tax incentives
Bodo Knoll,
Nadine Riedel,
Thomas Schwab,
Maximilian Todtenhaupt and
Johannes Voget
Research Policy, 2021, vol. 50, issue 9
Abstract:
Existing evidence shows that R&D tax incentives boost countries’ private sector R&D. Given the importance of multinational enterprises (MNEs) for private sector innovation, it is unclear, however, whether firms engage in genuinely new R&D or whether R&D is reallocated across borders. Drawing on data on unconsolidated R&D activity of MNEs in Europe, we provide evidence that responses are dominated by cross-border relocations: More generous tax incentives in one country increase MNEs’ R&D investments in affiliates located there, while lowering R&D investments in affiliates of the same MNE group located in other countries. Globally, firms hardly raise their R&D activities when tax incentives become more generous.
Keywords: Multinational firms; R&D tax incentives; R&D investment (search for similar items in EconPapers)
JEL-codes: F23 H24 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:respol:v:50:y:2021:i:9:s0048733321001268
DOI: 10.1016/j.respol.2021.104326
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