Can the Policy of Additional Deduction for R&D Expenses Promote the High-Quality Development of China’s Advanced Manufacturing Enterprises?

Huimin Yang () and Rajah Rasiah
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Huimin Yang: Asia Europe Institute, University of Malaya, Kuala Lumpur 50603, Malaysia
Rajah Rasiah: Asia Europe Institute, University of Malaya, Kuala Lumpur 50603, Malaysia

Sustainability, 2025, vol. 17, issue 20, 1-24

Abstract: Amid China’s economic transition toward high-quality development, the policy of additional deductions for R&D expenses, a key fiscal and taxation tool for incentivizing corporate innovation, has attracted considerable attention for its actual effects on the high-quality development of advanced manufacturing enterprises. Based on a sample of China’s A-share-listed advanced manufacturing enterprises from 2010 to 2024, this study empirically examines how the R&D extra deduction policy influences quality-driven development in high-end manufacturing enterprises, focusing on the mechanistic role of innovation input and output. The results indicate that the R&D tax deduction incentive policy substantially enhances quality-focused growth among high-tech manufacturing companies—a finding that persists after a series of robustness tests. Mechanism tests indicate that the policy promotes high-quality development by incentivizing enterprises to increase innovation input and output. Further analysis reveals a chain mediation effect between innovation input and output. Heterogeneity analysis reveals that the policy has a more significant promoting effect on large-scale advanced manufacturing enterprises and that, with the increasing policy intensity after 2018, its driving force for high-quality development intensified. This study provides micro-evidence for understanding the role of the additional deduction for R&D expenses in the high-quality development of advanced manufacturing enterprises, offering important implications for optimizing innovation incentive policies and promoting the transformation and upgrading of advanced manufacturing.

Keywords: tax policies; high-quality development of enterprises; advanced manufacturing industries; innovation; R&D investment (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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