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R&D tax incentive policy, intellectual property right protection, and corporate innovation in an emerging market

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  • Tang, Jinghua
  • Liu, Qigui

Abstract

Using the implementation of a pretax additional deduction (PAD) policy as a natural experiment, we document that the real effect of the PAD policy depends on regional intellectual property rights (IPR) protection. In regions with strong IPR protection, PAD policy enhances corporate innovation outputs and firms’ innovation intention, while in regions with weak IPR protection, the role of PAD policy is greatly moderated. However, firms still enjoy the policy’s tax benefits through real activity manipulation. Overall, we suggest that the value of the R&D PAD policy is mitigated in emerging markets lacking strong IPR protection. To promote innovation, governments should not only implement stimulus policies but also prioritize the development of robust IPR protection.

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  • Tang, Jinghua & Liu, Qigui, 2024. "R&D tax incentive policy, intellectual property right protection, and corporate innovation in an emerging market," Research in International Business and Finance, Elsevier, vol. 69(C).
    • Handle: RePEc:eee:riibaf:v:69:y:2024:i:c:s0275531924000369
    DOI: 10.1016/j.ribaf.2024.102244
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    More about this item

    Keywords

    Tax incentive policy; IPR protection; Corporate innovation; Real activities manipulation; Tax avoidance;
    All these keywords.

    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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