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Evaluating the Impact of R&D Tax Credits on Innovation: A Microeconometric Study on Canadian Firms

  • Czarnitzki, Dirk
  • Hanel, Petr
  • Rosa, Julio Miguel

This study examines the effect of R&D tax credits on innovation activities of Canadian manufacturing firms. Over the 1997-1999 period the Federal and Provincial R&D tax credit programs were used by more than one third of all manufacturing firms and by close to two thirds of firms in high-technology sectors. We investigate the average effect of R&D tax credits on a series of innovation indicators such as number of new products, sales with new products, originality of innovation etc. using a non-parametric matching approach. Compared to a hypothetical situation in the absence of R&D tax credits, recipients of tax credits show significantly better scores on most but not all performance indicators. We therefore conclude that tax credits increase the R&D engagement at the firm level and that the R&D activities induced by fiscal incentives lead to additional innovation output.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 04-77.

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Date of creation: 2004
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Handle: RePEc:zbw:zewdip:2882
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  25. Czarnitzki, Dirk & Kraft, Kornelius, 2000. "An empirical test of the asymmetric models on innovative activity: who invests more into R&D - the incumbent or the challenger?," ZEW Discussion Papers 00-10, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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  36. repec:adr:anecst:y:1998:i:49-50:p:16 is not listed on IDEAS
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