Unlocking Innovation: The Economic Impact of R&D Tax Credit Policies

Behrooz Shahmoradi and Abolfazl Bagheri

Journal of Tax Reform, 2025, vol. 11, issue 2, 341-357

Abstract: The growing body of literature on R&D tax credits presents a complex and fragmented landscape for policymakers seeking to enhance innovation-driven economic development. This study employs systematic review and content analysis of 56 peer-reviewed articles published between 2015 and 2025 to offer a structured synthesis of global R&D tax credit policies. Eight core policy orientations were identified: Effectiveness of R&D Tax Incentives, Policy Design and Implementation, Incentives for Startups and SMEs, Impact on Innovation Outcomes, Environmental Considerations, Regional and International Comparisons, Barriers to Effective Implementation, and Challenges and Limitations. Findings reveal that well-designed R&D tax credits significantly increase private R&D investments, especially in SMEs and low-tech sectors, with positive spillovers on patent output and long-term innovation performance. Cross-country comparisons indicate that simplified and transparent incentive structures correlate with higher utilization and innovation impact. The review also highlights sector-specific needs, with calls for tailored approaches and integration with broader innovative ecosystems. Importantly, the study identifies critical barriers such as information asymmetry, administrative burdens, and unequal access among smaller firms. Environmental sustainability emerged as an increasingly influential dimension, with R&D tax credits proving instrumental in promoting green technologies when aligned with environmental regulations. The study culminates in a comprehensive taxonomy that guides policymakers in optimizing R&D tax incentive schemes for equitable and sustainable innovation. This research contributes to a more nuanced and actionable understanding of the economic impacts of R&D tax policies, offering clear implications for evidence-based policy design and long-term economic resilience.

Keywords: R&D tax credits; innovation; economic growth; policy design; systematic review (search for similar items in EconPapers)
JEL-codes: H25 O31 O38 O40 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:aiy:jnljtr:v:11:y:2025:i:2:p:341-357

DOI: 10.15826/jtr.2025.11.2.205

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