R&D tax credit and innovation: Evidence from private firms in india

Olena Ivus, Manu Jose and Ruchi Sharma

Research Policy, 2021, vol. 50, issue 1

Abstract: Using firm-level data from 2001 to 2016, this paper evaluates the impact of India’s R&D tax credit scheme and its 2010-11 reform on the innovation activity of the country’s private firms. Registration with the Department of Scientific and Industrial Research (DSIR) is a requirement for the R&D tax credit eligibility. Not all firms have registered with the DSIR by 2016 and those that did, vary by year of registration. In a difference-in-difference setting, we evaluate the change in innovation activity after the reform in DSIR-registered firms relative to non-DSIR-registered firms. We also study the timing of DSIR registration and examine how the changes in firm innovation activity following registration were impacted by the 2010-11 reform. Among firms first registered with the DSIR after the 2010-11 reform, we find a sharp increase in firm R&D expenditures, R&D intensity, and the number of patent applications filed at the Indian Patent Office following registration. The reform has also spurred innovation in firms registered with the DSIR in or before 2001. The results are not driven by unobserved cross-firm heterogeneity or firm-specific time trends.

Keywords: R&D tax credits; Panel; Difference-in-difference; Firm-level; Innovation; Patents (search for similar items in EconPapers)
JEL-codes: F10 O34 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:respol:v:50:y:2021:i:1:s0048733320302031

DOI: 10.1016/j.respol.2020.104128

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