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Fiscal Incentives for Innovation in Foreign Countries: An Analytical Review of Positive and Negative Effects

Author

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  • I. A. Mayburov

    (Ural Federal University named after the first President of Russia B.N. Yeltsin, Yekaterinburg, Russian Federation; Financial University under the Government of the Russian Federation, Moscow, Russian Federation)

Abstract

The technological aspect of innovation stimulation is becoming central for Russia, since the introduction of new technologies is one of the most important factors affecting the economy’s ability to remain sustainable in the context of sanctions restrictions and cut-off from the transfer of breakthrough technologies. The task of the state to improve the efficiency of its fiscal policy with regard to stimulating innovation is highly relevant. In the course of the review we tried to answer the following questions: What impact do the main instruments of fiscal policy have on innovation stimulation? Which effects of innovation incentives are positive and which are negative, and what recommendations can increase the efficiency of fiscal policy? The purpose of this article was to identify the effects generated by the main instruments of innovation stimulation (tax incentives and budget subsidies) and to develop recommendations for the formation of effective fiscal policy. For the theoretical review the protocol of multistage selection of high-quality articles was used. The principle of incentive efficiency was substantiated and its decomposition into constituent effects was performed. Twelve incentive effects were identified. In the process of fiscal stimulation, the manifestation of six positive effects is revealed: the signal effect and the effects of knowledge spillover, productivity, high-tech companies, and market failure correction. Four negative effects are identified: crowding out, substitution, small and excessive incentives, and policy uncertainty. Two mixed effects are also identified: imitation and scale. The author's recommendations to strengthen the positive and mixed effects and neutralize the negative effects of innovation incentives are presented.

Suggested Citation

  • I. A. Mayburov, 2025. "Fiscal Incentives for Innovation in Foreign Countries: An Analytical Review of Positive and Negative Effects," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 5, pages 126-142, October.
    • Handle: RePEc:fru:finjrn:250508:p:126-142
    DOI: 10.31107/2075-1990-2025-5-126-142
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    References listed on IDEAS

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    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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