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Innovation under nexus requirements

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  • Weinrich, Arndt

Abstract

Exploiting granular European innovation data and the introduction of nexus requirements to patent boxes, I find that tightening access to preferential tax treatment of innovation output reduces inventive activity. A stylized framework and firm-reported constraints both point to internal funding as the binding mechanism. Consistently, effects appear on both the extensive margin, lowering the number of innovating firms, and the intensive margin, reducing resources devoted to innovation. Externally organized innovation declines relative to in-house activity, and innovation quality declines modestly. Spillover analyses indicate innovation decreases reflect forgone rather than reallocated innovation. Findings inform tax policy design and corporate innovation strategies.

Suggested Citation

  • Weinrich, Arndt, 2026. "Innovation under nexus requirements," arqus Discussion Papers in Quantitative Tax Research 312, arqus - Arbeitskreis Quantitative Steuerlehre.
    • Handle: RePEc:zbw:arqudp:336789
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    References listed on IDEAS

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