“…Given that U.S. firms invested approximately $502.9 billion in R&D activities in 2013 (OECD 2015), this suggests that the U.S. R&D tax credit induces anywhere between 2.2% and 6.6% of total corporate R&D investment in the U.S. With respect to IP boxes, Merrill et al (2012) estimate the cost of a U.S. version of an IP box regime at $9 billion (if enacted in the same form as in the U.K.) to $11 billion (if enacted in the same form as Belgium) per year. Given the heterogeneous nature of IP box regimes across countries, however, -2 -it is unclear whether and to what extent IP boxes increase innovative activities, or benefit firms (e.g., Alstadsaeter, Barrios, Nicodeme, Skonieczna, and Vezzani 2018;Bradley, Dauchy, and Robinson 2015;Chen, De Simone, Hanlon, and Lester 2016;Schwab and Todtenhaupt 2019). In contrast to contemporaneous research on IP boxes that examines multiple countries, our research design exhibits strong internal validity that allows us to estimate the extent to which an IP box affects innovative activity.…”