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Intellectual property rights, taxation, and firms’ innovation: theory and evidence from China

Author

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  • Rongxin Xu

    (University of Macau)

  • Yibai Yang

    (University of Macau)

  • Zhijie Zheng

    (Beijing Normal University)

Abstract

This study develops an R &D-based growth model with corporate taxation to explore the heterogeneous effects of intellectual property rights (IPR) protection on innovation of firms with different tax rates. Our theoretical analysis shows that strengthening IPR stimulates innovation, and a higher tax rate dampens the positive effect of IPR. To account for the interactive effect between IPR and taxation, we find supportive evidence for the theoretical result using firm-level data in China. Moreover, our empirical analysis shows that strengthening IPR is associated with less innovation by high-tax firms and more innovation by low-tax firms.

Suggested Citation

  • Rongxin Xu & Yibai Yang & Zhijie Zheng, 2024. "Intellectual property rights, taxation, and firms’ innovation: theory and evidence from China," Journal of Economics, Springer, vol. 142(1), pages 81-109, June.
    • Handle: RePEc:kap:jeczfn:v:142:y:2024:i:1:d:10.1007_s00712-023-00853-8
    DOI: 10.1007/s00712-023-00853-8
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    More about this item

    Keywords

    Intellectual property rights; Taxation; Innovation; Economic growth;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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