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The impact of fiscal incentives for R&D

In: Handbook of Innovation Policy Impact

Author

Listed:
  • Philippe Larédo
  • Christian Köhler
  • Christian Rammer

Abstract

R&D tax incentives are a policy tool to support business R&D. Their main rationale is to compensate for limited appropriability of private R&D due to knowledge spillovers. By granting a tax reduction depending on either the volume of or increase in a firm’s R&D expenditure, governments co-finance private R&D. The key direct objective of R&D tax incentives is to raise business R&D expenditure, and most evaluations undertaken have analysed the effectiveness of this instrument based on input additionality. In recent years, fiscal incentives have also been used to target other policy objectives, including the support of small and young firms, strengthening of industry–science linkages and promoting R&D in certain thematic areas. Furthermore there has been more and more attention by governments on broader impacts: the competitiveness of their industry and the international attractiveness of their country as a location for innovation. However, very few evaluations have addressed these issues, and little is yet known about the long-term welfare effects.

Suggested Citation

  • Philippe Larédo & Christian Köhler & Christian Rammer, 2016. "The impact of fiscal incentives for R&D," Chapters, in: Jakob Edler & Paul Cunningham & Abdullah Gök & Philip Shapira (ed.), Handbook of Innovation Policy Impact, chapter 2, pages 18-53, Edward Elgar Publishing.
  • Handle: RePEc:elg:eechap:16121_2
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    Cited by:

    1. Grashof, Nils, 2021. "Putting the watering can away –Towards a targeted (problem-oriented) cluster policy framework," Research Policy, Elsevier, vol. 50(9).

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