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R&D tax credit and innovation: Evidence from private firms in india

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  • Ivus, Olena
  • Jose, Manu
  • Sharma, Ruchi

Abstract

Using firm-level data from 2001 to 2016, this paper evaluates the impact of India’s R&D tax credit scheme and its 2010-11 reform on the innovation activity of the country’s private firms. Registration with the Department of Scientific and Industrial Research (DSIR) is a requirement for the R&D tax credit eligibility. Not all firms have registered with the DSIR by 2016 and those that did, vary by year of registration. In a difference-in-difference setting, we evaluate the change in innovation activity after the reform in DSIR-registered firms relative to non-DSIR-registered firms. We also study the timing of DSIR registration and examine how the changes in firm innovation activity following registration were impacted by the 2010-11 reform. Among firms first registered with the DSIR after the 2010-11 reform, we find a sharp increase in firm R&D expenditures, R&D intensity, and the number of patent applications filed at the Indian Patent Office following registration. The reform has also spurred innovation in firms registered with the DSIR in or before 2001. The results are not driven by unobserved cross-firm heterogeneity or firm-specific time trends.

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  • Ivus, Olena & Jose, Manu & Sharma, Ruchi, 2021. "R&D tax credit and innovation: Evidence from private firms in india," Research Policy, Elsevier, vol. 50(1).
    • Handle: RePEc:eee:respol:v:50:y:2021:i:1:s0048733320302031
    DOI: 10.1016/j.respol.2020.104128
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    More about this item

    Keywords

    R&D tax credits; Panel; Difference-in-difference; Firm-level; Innovation; Patents;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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