IDEAS home Printed from https://ideas.repec.org/a/bla/worlde/v47y2024i12p4547-4569.html
   My bibliography  Save this article

Do tax incentives for innovation attract high‐technology investment from emerging markets? Evidence from China's outward foreign direct investment

Author

Listed:
  • Shuzhong Ma
  • Kai Liu
  • Peng Wu

Abstract

We examine whether the innovation box regime (IBR), a tax incentive with lower tax rates on intellectual property (IP)‐related income, attracts high‐technology investment from emerging markets. Using the staggered difference‐in‐differences (DID) method, we find that China's high‐technology investment in IBR countries, relative to non‐IBR countries, increases significantly after the implementation of IBR. This finding is robust to a battery of sensitivity tests. The mechanism analysis suggests that the attraction of the IBR for high‐technology investment is realised through the encouragement of innovation, and this finding is also verified in the heterogeneity analysis. We also find that the IBR has a positive effect on high‐technology investment only if the tax incentives apply to pre‐existing IP before the regime implementation, and the ease with which enterprises can directly use the latest technologies in the host country does not have an impact on the effectiveness of the IBR. Moreover, the effect of IBR on M&A is larger than that on greenfield investment. Our study contributes to the literature and policy assessment on IBR.

Suggested Citation

  • Shuzhong Ma & Kai Liu & Peng Wu, 2024. "Do tax incentives for innovation attract high‐technology investment from emerging markets? Evidence from China's outward foreign direct investment," The World Economy, Wiley Blackwell, vol. 47(12), pages 4547-4569, December.
  • Handle: RePEc:bla:worlde:v:47:y:2024:i:12:p:4547-4569
    DOI: 10.1111/twec.13637
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/twec.13637
    Download Restriction: no

    File URL: https://libkey.io/10.1111/twec.13637?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:worlde:v:47:y:2024:i:12:p:4547-4569. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0378-5920 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.