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Taxes, Technology Transfer, and the R&D Activities of Multinational Firms


  • James R. Hines, Jr.


Multinational firms that use domestic technologies in foreign locations are required to pay royalties from foreign users to domestic owners. Foreign governments often tax these royalty payments. High royalty tax rates raise the cost of imported technologies. This paper examines the effect of royalty taxes on the local R&D intensities for foreign affiliates of multinational corporations, looking both at foreign-owned affiliates in the United States and at American-owned affiliates in other countries. The results indicate that higher royalty taxes are associated with greater R&D intensity on the part of affiliates, suggesting that local R&D is a substitute for imported technology.

Suggested Citation

  • James R. Hines, Jr., 1994. "Taxes, Technology Transfer, and the R&D Activities of Multinational Firms," NBER Working Papers 4932, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4932
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    References listed on IDEAS

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    Cited by:

    1. Desai, Mihir A. & Foley, C. Fritz & Hines, James R. Jr., 2001. "Repatriation Taxes and Dividend Distortions," National Tax Journal, National Tax Association, vol. 54(4), pages 829-851, December.
    2. James R. Hines Jr., 2005. "Do Tax Havens Flourish?," NBER Chapters,in: Tax Policy and the Economy, Volume 19, pages 65-100 National Bureau of Economic Research, Inc.
    3. Pierre Mohnen, 1999. "Tax Incentives: Issue and Evidence," CIRANO Working Papers 99s-32, CIRANO.
    4. Gordon, Roger H. & Hines, James Jr, 2002. "International taxation," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 28, pages 1935-1995 Elsevier.
    5. Dagenais, Marcel & Mohnen, Pierre & Therrien, Pierre, 2004. "Les firmes canadiennes répondent-elles aux incitations fiscales à la recherche-développement?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 80(2), pages 175-205, Juin-Sept.
    6. James R. Hines, Jr., 1996. "Tax Policy and the Activities of Multinational Corporations," NBER Working Papers 5589, National Bureau of Economic Research, Inc.
    7. Dagenais, M. & Mohnen, P. & Therrien, P., 1997. "Do Canadian Firms Respond to Fiscal Incentives To Research and Development?," G.R.E.Q.A.M. 97b05, Universite Aix-Marseille III.
    8. Christoph Ernst & Katharina Richter & Nadine Riedel, 2013. "Corporate taxation and the quality of research & development," Working Papers 1301, Oxford University Centre for Business Taxation.
    9. Mihir A. Desai & C. Fritz Foley & James R. Hines Jr., 2002. "International Joint Ventures and the Boundaries of the Firm," NBER Working Papers 9115, National Bureau of Economic Research, Inc.
    10. Mihir A. Desai & James R. Hines, Jr., 1996. ""Basket" Cases: International Joint Ventures After the Tax Reform Act of 1986," NBER Working Papers 5755, National Bureau of Economic Research, Inc.
    11. Gernot Hutschenreiter, 2002. "Fiscal Incentives for Research and Development," WIFO Monatsberichte (monthly reports), WIFO, vol. 75(2), pages 121-131, February.

    More about this item

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business


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