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DOES PERSISTENCE IN USING R&D TAX CREDITS HELP TO ACHIEVE PRODUCT INNOVATIONS?

Jose Labeaga, Ester Martínez-Ros (), Amparo Sanchis-Llopis and Juan A. Sanchis-Llopis
Additional contact information
Amparo Sanchis-Llopis: University of Valencia and ERICES
Juan A. Sanchis-Llopis: University of Valencia and ERICES

Authors registered in the RePEc Author Service: Juan A. Sanchis Llopis ()

No 2003, Working Papers from Department of Applied Economics II, Universidad de Valencia

Abstract: Despite the generosity of its tax system, Spain is far from EU neighbouring countries in terms of R&D spending, and in innovation outcomes. A policy instrument commonly used to foster firms’ investment in R&D are tax incentives. The use of this instrument is not generalized in firms spending on R&D, and only a fraction of firms are regular claimants. In this paper we investigate whether persistence in using tax credits is positively related to the achievement of product innovations, beyond R&D investments. We consider that firms investing in qualified R&D spending and making a regular use of tax credits are likely to be firms aiming at innovating. By contrast, occasional tax credit users are probably firms seeking to reduce their corporate tax burden, and not prioritizing the achievement innovations. Using a sample of Spanish manufacturing firms spanning 2001-2014, we first estimate persistence using a duration model accounting for firm observed and unobserved heterogeneity. Our results are consistent with negative duration dependence, indicating that the probability of ceasing in claiming tax credits decreases with the passage of time. Second, we estimate a count-data model and find that the number of product innovations positively depends on tax credit persistence only for SMEs.

Keywords: tax credits; persistence; duration dependence; count-data (search for similar items in EconPapers)
JEL-codes: C41 H25 H32 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-acc, nep-eur, nep-ino, nep-pbe, nep-pub, nep-sbm and nep-tid
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