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

Antoine Dechezleprêtre, Elias Einiö, Ralf Martin, Kieu-Trang Nguyen and John van Reenen

American Economic Journal: Economic Policy, 2023, vol. 15, issue 4, 486-521

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-codes: D22 H25 H32 O31 O34 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (10)

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DOI: 10.1257/pol.20200739

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