Volume 7, Issue 2, April 2019, Page: 37-44
The Effect of Fiscal Incentives on Business R&D
Valeria Bucci, Department of Economics, University of Salento, Lecce, Italy and Sose SpA, Rome, Italy
Received: Feb. 19, 2019;       Accepted: Mar. 30, 2019;       Published: Apr. 18, 2019
DOI: 10.11648/j.ijefm.20190702.11      View  491      Downloads  130
This paper analyses the determinants of business R&D choices. In particular, it provides new empirical evidence on the effectiveness of fiscal policies aimed at driving companies to invest in R&D activity. By computing two very accurate proxies for firm-specific tax savings achievable when investing in R&D, and by exploiting exogenous changes in fiscal legislation in Italy, this study investigates if fiscal considerations affect companies’ choice to invest in R&D and how much to spend in such activity. The empirical analysis is based on an unbalanced panel data set composed of 163 Italian companies, covering the years 2004-2010. A two-step approach has been implemented, by combining a probit and a tobit estimation model. The results deliver strong empirical evidence that fiscal incentives significantly affect business R&D choices, by one side, increasing companies’ likelihood to invest in R&D, and, by the other, fostering companies’ R&D expenditure.
Innovation, R&D, Fiscal Incentives, Marginal Tax Savings
To cite this article
Valeria Bucci, The Effect of Fiscal Incentives on Business R&D, International Journal of Economics, Finance and Management Sciences. Vol. 7, No. 2, 2019, pp. 37-44. doi: 10.11648/j.ijefm.20190702.11
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