Fiscal Incentives for Innovation in Foreign Countries: An Analytical Review of Positive and Negative Effects

Igor Mayburov ()

Finansovyj žhurnal — Financial Journal, 2025, issue 5, 126-142

Abstract: The technological aspect of innovation stimulation is becoming central for Russia, since the introduction of new technologies is one of the most important factors affecting the economy’s ability to remain sustainable in the context of sanctions restrictions and cut-off from the transfer of breakthrough technologies. The task of the state to improve the efficiency of its fiscal policy with regard to stimulating innovation is highly relevant. In the course of the review we tried to answer the following questions: What impact do the main instruments of fiscal policy have on innovation stimulation? Which effects of innovation incentives are positive and which are negative, and what recommendations can increase the efficiency of fiscal policy? The purpose of this article was to identify the effects generated by the main instruments of innovation stimulation (tax incentives and budget subsidies) and to develop recommendations for the formation of effective fiscal policy. For the theoretical review the protocol of multistage selection of high-quality articles was used. The principle of incentive efficiency was substantiated and its decomposition into constituent effects was performed. Twelve incentive effects were identified. In the process of fiscal stimulation, the manifestation of six positive effects is revealed: the signal effect and the effects of knowledge spillover, productivity, high-tech companies, and market failure correction. Four negative effects are identified: crowding out, substitution, small and excessive incentives, and policy uncertainty. Two mixed effects are also identified: imitation and scale. The author's recommendations to strengthen the positive and mixed effects and neutralize the negative effects of innovation incentives are presented.

Keywords: fiscal stimulation; budget subsidies; tax breaks; incentive effects; innovation; R&D; efficiency (search for similar items in EconPapers)
JEL-codes: H21 H25 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:fru:finjrn:250508:p:126-142

DOI: 10.31107/2075-1990-2025-5-126-142

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