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Capital incentives in the age of intangibles

Author

Listed:
  • Timothy DeStefano
  • Nick Johnstone
  • Richard Kneller
  • Jonathan Timmis

Abstract

Cloud computing presents a significant change in the way firms access digital technology and enables data-driven business models. Now, firms can acquire their storage, processing and software needs as a cloud computing service rather than making upfront fixed cost investments in capital. Yet, policies that encourage digital diffusion are still targeted towards investment in physical IT capital. This paper exploits a UK tax incentive for capital investment to examine firm adoption of cloud computing and big data analytics. Using a quasi-natural experimental approach our empirical results show that the policy increased investment in IT capital and hardware as one would expect; but it reduced the adoption of cloud and big data analytics. The adverse effects of the policy on cloud and big data adoption are particularly pronounced for small firms.

Suggested Citation

  • Timothy DeStefano & Nick Johnstone & Richard Kneller & Jonathan Timmis, 2020. "Capital incentives in the age of intangibles," Discussion Papers 2020-06, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:2020-06
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    File URL: https://www.nottingham.ac.uk/gep/documents/papers/2020/2020-06.pdf
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    Keywords

    ICT; cloud computing; big data analytics;
    All these keywords.

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