Entrepreneurial Innovations and Taxation

Andreas Haufler, Pehr-Johan Norbäck and Lars Persson

No 3473, CESifo Working Paper Series from CESifo

Abstract: In many countries entrepreneurship is promoted through tax reductions for small businesses and by various government support schemes. We analyze the effects of such policies to subsidize small businesses in a setting where both the risk-return characteristics of the selected innovation project and the mode of commercialization chosen by entrepreneurs (market entry versus sale to an incumbent firm) are endogenous. We show that government programs to support small businesses foster market entry by entrepreneurs but, at the same time, give an incentive to choose low risk projects, due to the existence of limited loss offset provisions. This points to a basic trade-off between the goals of raising competition in technology-intensive markets and the desire of governments to foster risky ‘breakthrough’ innovations.

Keywords: business taxation; innovation; market entry (search for similar items in EconPapers)
JEL-codes: H25 L13 M13 O31 (search for similar items in EconPapers)
Date: 2011
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Related works:
Journal Article: Entrepreneurial innovations and taxation (2014)
Working Paper: Entrepreneurial innovations and taxation (2012)
Working Paper: Entrepreneurial Innovations and Taxation (2012)
Working Paper: Entrepreneurial innovations and taxation (2011)
Working Paper: Entrepreneurial innovations and taxation (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3473

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