Taxes, R&amp;D Expenditures, and Open Innovation: Analyzing OECD Countries

PurposeThere is a scarcity of empirical evidence in the literature on the chain of causality involving tax incentives for Research and Development (R&D) activities and their subsequent transformation into innovation. This study aims to assess the influence of R&D tax incentives on the organizational attributes of Portuguese firms to identify how they are converted into innovation.Design/methodology/approachA structural research model consisting of 339 companies that benefited from the Fiscal Incentive System supporting R&D in Enterprises, during the period from 2013 to 2016, was developed. This was done to assess the role of R&D tax incentives on the organizational attributes that form the innovation capacity. The model was validated using the multivariate statistical technique of structural equation modeling with partial least squares estimation (partial least squares structural equation modeling – PLS-SEM).FindingsThe results found suggest that although it is not possible to unequivocally identify the mechanisms used to convert tax incentives into innovation, it is possible to conclude that they play an important spillover effect for the construction and strengthening of organizational attributes. These form the basis of innovation capacity, to the extent that they positively influence the firms’ total assets, equity, liabilities, number of employees and sales. Hence, contributions are brought to both the literature on tax incentives and the general literature on innovation.Originality/valueFor policymakers, the evidence points to the fact that in addition to the incentives provided, novel mechanisms need to be established to help firms develop their absorptive capacity. The objective is to effectively convert the incentives received into innovation through the organizational attributes analyzed. From the firms’ point of view, the results found suggest that tax incentives act as a catalyst for making R&D investments. Additionally, there is an influence on employability, which effectively enhances the chances of innovation in the long run. Tax incentives received by Portuguese firms also have the effect of promoting economic dynamism – by enhancing the following: investments in infrastructure, the hiring of employees and the increasing of sales, generating positive externalities for both firms and society.

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“…Spending on R&D activities is positively associated with the innovation index of OECD member countries (Balsalobre-Lorente et al. , 2021).…”

Section: Structural Model and Research Hypothesesmentioning

confidence: 99%

“…Spending on R&D activities is positively associated with the innovation index of OECD member countries (Balsalobre-Lorente et al, 2021). R&D activities are understood as one of the main elements of innovation.…”

Section: Randd Tax Incentives and Innovationmentioning

confidence: 99%

R&D tax incentives and innovation: unveiling the mechanisms behind innovation capacity

Walter

Au‐Yong‐Oliveira

Veloso

et al. 2022

JAMR

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“…If an enterprise wants to achieve sustainable development, it must pay attention to R&D investment and innovation, reasonably arrange the investment amount according to its own situation, and combine short-term interest with long-term interests [39]. When there is a preferential tax policy, enterprises should weigh the cost of innovation with tax incentives to avoid unproductive innovation affecting the efficiency of enterprise operations [40]. It is necessary to improve technological innovation capabilities and focus on R&D efficiency, and the combination of CSR and technological innovation strategies can help improve corporate financial performance [41].…”

Section: Theoretical Analysis and Research Hypothesesmentioning

confidence: 99%

Research on Technological Innovation Investment, Financing Constraints, and Corporate Financial Risk: Evidence from China

Liu

Yang

et al. 2022

Mathematical Problems in Engineering

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Technological innovation is the source of generating new momentum. In the context of the financing constraints generally existing in China, it is particularly important to explore the impact of technological innovation investment on corporate financial risk, which also provides a risk identification perspective and development direction for enterprises. Based on the data of China’s small and medium-sized listed companies from 2010 to 2019, and from the perspective of moderating effect of financing constraints, this paper uses multiple regression analysis method to test the impact mechanism of technological innovation investment on corporate financial risk and the moderating effect of financing constraints in both. The results show that technological innovation investment can significantly reduce corporate financial risk, while financing constraints can significantly improve the level of financial risk. Financing constraints play a moderating role in technological innovation investment and financial risk. Heterogeneity test found that, compared with large-scale enterprises, small-scale enterprises’ technological innovation investment has a more significant impact on financial risk, and the moderating effect of financing constraints is also greater. Compared with private enterprises, state-owned enterprises’ technological innovation investment has less impact on financial risk, and the moderating effect of financing constraints is not significant.

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Mapping the Relationship of Research and Development Expenditures and Economic Growth through Bibliometric Analysis: A Theoretical Perspective

Shahid,

Khin,

Seong

et al. 2024

J Knowl Econ

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Taxes, R&D Expenditures, and Open Innovation: Analyzing OECD Countries

Cited by 7 publications

References 47 publications

R&D tax incentives and innovation: unveiling the mechanisms behind innovation capacity

R&D tax incentives and innovation: unveiling the mechanisms behind innovation capacity

Research on Technological Innovation Investment, Financing Constraints, and Corporate Financial Risk: Evidence from China

Mapping the Relationship of Research and Development Expenditures and Economic Growth through Bibliometric Analysis: A Theoretical Perspective

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