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Tax Policy and R&D Investment by Australian Firms

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  • RUSSELL THOMSON

Abstract

This paper examines the determinants of investment in R&D by Australian firms, with a focus on the role of tax policy. The analysis considers an unbalanced panel of financial data of approximately 500 large Australian firms between 1990 and 2005. The principal result is that no evidence can be found that the user cost of R&D is an important determinant of firm R&D investment decisions. A corollary is that there is no evidence that tax incentives are an effective policy tool. Growth in sales is found to be the primary determinant of R&D investment, which is interpreted as evidence of the central role of demand conditions.

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  • Russell Thomson, 2010. "Tax Policy and R&D Investment by Australian Firms," The Economic Record, The Economic Society of Australia, vol. 86(273), pages 260-280, June.
    • Handle: RePEc:bla:ecorec:v:86:y:2010:i:273:p:260-280
    DOI: 10.1111/j.1475-4932.2010.00636.x
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    Cited by:

    1. Russell Thomson & Elizabeth Webster, 2012. "The Design of R & D Support Schemes for Industry," Economic Papers, The Economic Society of Australia, vol. 31(4), pages 464-477, December.
    2. Amani, Elnasri & Fox, Kevin J., 2015. "R&D, Innovation and Productivity: The Role of Public Support," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 37(1), pages 73-96.
    3. Ke Zhang & Jenny Jing Wang & Yanqi Sun & Sarowar Hossain, 2021. "Financial slack, institutional shareholding and enterprise innovation investment: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(2), pages 3235-3259, June.
    4. Holt, Jared & Skali, Ahmed & Thomson, Russell, 2021. "The additionality of R&D tax policy: Quasi-experimental evidence," Technovation, Elsevier, vol. 107(C).
    5. Blandinieres, Florence & Steinbrenner, Daniela, 2021. "How does the evolution of R&D tax incentives schemes impact their effectiveness? Evidence from a meta-analysis," ZEW Discussion Papers 21-020, ZEW - Leibniz Centre for European Economic Research.
    6. Chen, Wanyi & Jin, Rong, 2023. "Does tax uncertainty affect firm innovation speed?," Technovation, Elsevier, vol. 125(C).
    7. Blandinieres, Florence & Steinbrenner, Daniela & Weiß, Bernd, 2020. "Which design works? A meta-regression analysis of the impacts of R&D tax incentives," ZEW Discussion Papers 20-010, ZEW - Leibniz Centre for European Economic Research.
    8. Russell Thomson, 2013. "The Effectiveness of R&D Tax Credits: Cross-Industry Evidence," Melbourne Institute Working Paper Series wp2013n18, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

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    More about this item

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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