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Evaluating the impact of R&D tax credits on innovation: A microeconometric study on Canadian firms

Listed author(s):
  • Czarnitzki, Dirk
  • Hanel, Petr
  • Rosa, Julio Miguel

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 lead to additional innovation output.

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Article provided by Elsevier in its journal Research Policy.

Volume (Year): 40 (2011)
Issue (Month): 2 (March)
Pages: 217-229

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Handle: RePEc:eee:respol:v:40:y:2011:i:2:p:217-229
Contact details of provider: Web page: http://www.elsevier.com/locate/respol

References listed on IDEAS
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  1. Bronwyn Hall, 2004. "The financing of research and development," Chapters, in: Financial Systems, Corporate Investment in Innovation, and Venture Capital, chapter 2 Edward Elgar Publishing.
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  8. Czarnitzki, Dirk & Kraft, Kornelius, 2004. "An empirical test of the asymmetric models on innovative activity: who invests more into R&D, the incumbent or the challenger?," Journal of Economic Behavior & Organization, Elsevier, vol. 54(2), pages 153-173, June.
  9. David, Paul A. & Hall, Bronwyn H. & Toole, Andrew A., 2000. "Is public R&D a complement or substitute for private R&D? A review of the econometric evidence," Research Policy, Elsevier, vol. 29(4-5), pages 497-529, April.
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  11. Petr Hanel & Alain St-Pierre, 2002. "Effects of R & D Spillovers on the Profitability of Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 20(4), pages 305-322, June.
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  13. Klette, Tor Jakob & Moen, Jarle & Griliches, Zvi, 2000. "Do subsidies to commercial R&D reduce market failures? Microeconometric evaluation studies1," Research Policy, Elsevier, vol. 29(4-5), pages 471-495, April.
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  25. repec:adr:anecst:y:1998:i:49-50:p:16 is not listed on IDEAS
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  27. James J. Heckman & Hidehiko Ichimura & Petra Todd, 1998. "Matching As An Econometric Evaluation Estimator," Review of Economic Studies, Oxford University Press, vol. 65(2), pages 261-294.
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  35. repec:adr:anecst:y:1998:i:49-50 is not listed on IDEAS
  36. Petr Hanel, 2003. "Impact Of Government Support Programs On Innovation By Canadian Manufacturing Firms," Cahiers de recherche 04-02, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke.
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