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Tax Policy and R&D Investment by Australian Firms

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  • RUSSELL THOMSON

Abstract

This paper examines the determinants of investment in R&D by Australian firms, with a focus on the role of tax policy. The analysis considers an unbalanced panel of financial data of approximately 500 large Australian firms between 1990 and 2005. The principal result is that no evidence can be found that the user cost of R&D is an important determinant of firm R&D investment decisions. A corollary is that there is no evidence that tax incentives are an effective policy tool. Growth in sales is found to be the primary determinant of R&D investment, which is interpreted as evidence of the central role of demand conditions. Copyright © 2010 The Economic Society of Australia.

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Bibliographic Info

Article provided by The Economic Society of Australia in its journal Economic Record.

Volume (Year): 86 (2010)
Issue (Month): 273 (06)
Pages: 260-280

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Handle: RePEc:bla:ecorec:v:86:y:2010:i:273:p:260-280

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  1. Bronwyn H. Hall, Jacques Mairesse, Lee Branstetter, and Bruno Crepon., 1998. "Does Cash Flow Cause Investment and R& D: An Exploration Using Panel Data for French, Japanese, and United States Scientific Firms," Economics Working Papers 98-260, University of California at Berkeley.
  2. James Love & Stephen Roper, 1999. "The Determinants of Innovation: R & D, Technology Transfer and Networking Effects," Review of Industrial Organization, Springer, vol. 15(1), pages 43-64, August.
  3. L. C. Hunter & Elizabeth Webster & Anne Wyatt, 2005. "Measuring Intangible Investment," Melbourne Institute Working Paper Series wp2005n15, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  4. Bruno Van Pottelsberghe & Dominique Guellec, 2003. "The impact of public R&D expenditure on business R&D," ULB Institutional Repository 2013/6213, ULB -- Universite Libre de Bruxelles.
  5. Martin Falk, 2006. "What drives business Research and Development (R&D) intensity across Organisation for Economic Co-operation and Development (OECD) countries?," Applied Economics, Taylor and Francis Journals, vol. 38(5), pages 533-547.
  6. Marcel Dagenais & Pierre Mohnen & Pierre Therrien, 1997. "Do Canadian Firms Respond to Fiscal Incentives to Research and Development?," CIRANO Working Papers 97s-34, CIRANO.
  7. Nickell, S.J., 1993. "Competition and Crporate Performance," Economics Series Working Papers 99155, University of Oxford, Department of Economics.
  8. Hamada, Robert S, 1972. "The Effect of the Firm's Capital Structure on the Systematic Risk of Common Stocks," Journal of Finance, American Finance Association, vol. 27(2), pages 435-52, May.
  9. Nicholas Bloom & Rachel Griffith & John Van Reenen, 2007. "Do R&D Tax Credits Work? Evidence from a Panel of Countries 1979-1997," Discussion Papers 07-020, Stanford Institute for Economic Policy Research.
  10. Jeffrey I. Bernstein, 1986. "The Effect of Direct and Indirect Tax Incentives on Canadian Industrial R&D Expenditures," Canadian Public Policy, University of Toronto Press, vol. 12(3), pages 438-448, September.
  11. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  12. Teece, David J., 1993. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," Research Policy, Elsevier, vol. 22(2), pages 112-113, April.
  13. George Symeonidis, 1996. "Innovation, Firm Size and Market Structure: Schumpeterian Hypotheses and Some New Themes," OECD Economics Department Working Papers 161, OECD Publishing.
  14. Richardson, Martin & Wilkie, Simon, 1995. "Incremental R&D Subsidies," Journal of Regulatory Economics, Springer, vol. 7(2), pages 161-75, March.
  15. Bronwyn H. Hall & John van Reenen, 1999. "How Effective are Fiscal Incentives for R&D? A New Review of the Evidence," NBER Working Papers 7098, National Bureau of Economic Research, Inc.
  16. William Griffiths & Elizabeth Webster, 2004. "The determinants of research and development and intellectual property usage among Australian Companies, 1989 to 2002," Centre for International Economic Studies Working Papers 2004-15, University of Adelaide, Centre for International Economic Studies.
  17. Paul Romer, 1991. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
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Cited by:
  1. Russell Thomson & Elizabeth Webster, 2011. "The Design of R&D Support Schemes for Industry," Melbourne Institute Working Paper Series wp2011n24, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

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