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Impact of the excise tax on firm R&D and performance in the medical device industry: Evidence from the Affordable Care Act

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  • Lee, Daeyong

Abstract

This article examines how the excise tax affects firms’ R&D investment, performance, and market strategy in the US medical device industry. The Affordable Care Act imposed a 2.3% excise tax on medical devices beginning in January 2013, and thus this study compares the medical device firms with other high-tech firms before and after the tax incidence. Using COMPUSTAT data from 2006 to 2015, the author finds that the excise tax reduced R&D investment, sales revenue, gross margins, and earnings for medical device firms. In addition, the excise tax increased their global market sales intensity, global market diversification, and customer diversification in the US domestic market.

Suggested Citation

  • Lee, Daeyong, 2018. "Impact of the excise tax on firm R&D and performance in the medical device industry: Evidence from the Affordable Care Act," Research Policy, Elsevier, vol. 47(5), pages 854-871.
    • Handle: RePEc:eee:respol:v:47:y:2018:i:5:p:854-871
    DOI: 10.1016/j.respol.2018.02.010
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    More about this item

    Keywords

    Medical device tax; Research and development (R&D); Firm performance; Market strategy; Affordable Care Act;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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