Does persistence in using R&D tax credits help to achieve product innovations?

Jose Labeaga, Ester Martínez-Ros, Amparo Sanchis and Juan A. Sanchis

Technological Forecasting and Social Change, 2021, vol. 173, issue C

Abstract: Despite the generosity of its tax system, Spain is far from EU countries in terms of R&D spending and innovation outcomes. A policy instrument commonly used to foster firms’ R&D investment are tax incentives. The use of this instrument is not generalized in firms spending on R&D, and only a fraction of firms are regular claimants. This paper investigates whether persistence in using tax credits is positively related to product innovations, beyond R&D investments. We consider that firms investing in qualified R&D and using tax credits regularly are likely to be firms aiming at innovating. By contrast, occasional tax credit users may be firms investing in R&D for different reasons, such as exploiting a business opportunity, or reducing their corporate tax burden, so that they may not prioritize innovating. Using a sample of Spanish manufacturing firms spanning 2001–2014, we first estimate persistence using a duration model accounting for firm observed and unobserved heterogeneity. Our results are consistent with negative duration dependence, indicating that the probability of ceasing in claiming tax credits decreases with the passage of time. Second, we estimate a count-data model and find that the number of product innovations positively depends on tax credit persistence only for SMEs.

Keywords: Tax credits; Persistence; Duration dependence; Count-data (search for similar items in EconPapers)
JEL-codes: C41 H25 H32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: DOES PERSISTENCE IN USING R&D TAX CREDITS HELP TO ACHIEVE PRODUCT INNOVATIONS? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:173:y:2021:i:c:s0040162521004972

DOI: 10.1016/j.techfore.2021.121065

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