Publication: Does persistence in using R&D tax credits help to achieve product innovations?
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2021-12
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ELSEVIER BV
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Abstract
Despite the generosity of its tax system, Spain is far from EU countries in terms of R&D spending and innovation
outcomes. A policy instrument commonly used to foster firms’ R&D investment 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. This
paper investigates whether persistence in using tax credits is positively related to product innovations, beyond
R&D investments. We consider that firms investing in qualified R&D and using tax credits regularly are likely to
be firms aiming at innovating. By contrast, occasional tax credit users may be firms investing in R&D for different
reasons, such as exploiting a business opportunity, or reducing their corporate tax burden, so that they may not
prioritize innovating. 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.
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Keywords
Count-data, Duration dependence, Persistence, Tax credits
Bibliographic citation
Labeaga, J. M., Martínez-Ros, E., Sanchis, A., & Sanchis, J. A. (2021). Does persistence in using R&D tax credits help to achieve product innovations? In Technological Forecasting and Social Change (Vol. 173, p. 121065). Elsevier BV.