Evaluating the Impact of R&D Tax Credits on Innovation: A Microeconometric Study on Canadian Firms

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Evaluating the Impact of R&D Tax Credits on Innovation: A Microeconometric Study on Canadian Firms

Author Info

Petr Hanel () (GREDI, Département d'économique, Université de Sherbrooke)
Dirk Czarnitzki () (Centre for European Economic Research (ZEW), Dept. of Industrial Economics and International Management)
Julio Miguel Rosa () (Statistics Canada)

Abstract

This study examines the effect of R&D tax credits on innovation activities of Canadian manufacturing firms. Over the 1997-1999 period the Federal and Provincial R&D tax credit programs were used by more than one third of all manufacturing firms and by close to two thirds of firms in high-technology sectors. We investigate the average effect of R&D tax credits on a series of innovation indicators such as number of new products, sales with new products, originality of innovation etc. using a non-parametric matching approach. Compared to a hypothetical situation in the absence of R&D tax credits, recipients of tax credits show significantly better scores on most but not all performance indicators. We therefore conclude that tax credits increase the R&D engagement at the firm level and that the R&D activities induced by fiscal incentives lead to additional innovation output.

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Publisher Info
Paper provided by Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke in its series Cahiers de recherche with number 05-01.

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Length: 25 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:shr:wpaper:05-01

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Postal: Sherbrooke, Qu�bec, J1K 2R1
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Find related papers by JEL classification:
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
O38 - Economic Development, Technological Change, and Growth - - Technological Change - - - Government Policy

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-08-13 (All new papers)
NEP-INO-2005-08-13 (Innovation)
NEP-TID-2005-08-13 (Technology & Industrial Dynamics)

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