EconPapers    
Economics at your fingertips  
 

Innovation to Keep or to Sell and Tax Incentives

Colin Davis and Laixun Zhao
Additional contact information
Laixun Zhao: Research Institute for Economics & Business Administration (RIEB), Kobe University, JAPAN

No DP2022-28, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: We study how tax policy affects economic growth through entrepreneurs' choice of commercialization mode. Introducing both heterogeneous quality jumps and a leapfrog versus sell choice into the quality-ladders model, we show that entrepreneurs use high-quality innovations to leapfrog incumbent firms and become new market leaders, but sell low quality ones to incumbents. Tax incentives that promote leapfrogging slow the rate of innovation. A numerical analysis concludes that subsidies to product design improve welfare. Corporate taxes, capital gains taxes, and subsidies to market entry all harm welfare.

Keywords: Innovation based growth; Heterogenous quality improvements; Innovation sales; Corporate tax; Capital gains tax; Market entry subsidy; Product design subsidy (search for similar items in EconPapers)
JEL-codes: O31 O33 O43 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2022-06, Revised 2022-11
New Economics Papers: this item is included in nep-acc, nep-ent, nep-ino, nep-pbe, nep-pub, nep-sbm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2022-28.pdf Revised version, 2022 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kob:dpaper:dp2022-28

Access Statistics for this paper

More papers in Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University 2-1 Rokkodai, Nada, Kobe 657-8501 JAPAN. Contact information at EDIRC.
Bibliographic data for series maintained by Office of Promoting Research Collaboration, Research Institute for Economics & Business Administration, Kobe University ().

 
Page updated 2023-01-21
Handle: RePEc:kob:dpaper:dp2022-28