The Resource A cross-national comparison of R&D expenditure decisions : tax incentives and financial constraints

A cross-national comparison of R&D expenditure decisions : tax incentives and financial constraints

Label
A cross-national comparison of R&D expenditure decisions : tax incentives and financial constraints
Title
A cross-national comparison of R&D expenditure decisions : tax incentives and financial constraints
Creator
Subject
Language
  • eng
  • eng
Summary
This article provides evidence on the impact of tax incentives and financial constraints on corporate R&D expenditure decisions. The authors contribute to extant research by comparing research and development (R&D) expenditures in the United States and Canada, thereby exploiting the differences in the two countries' R&D tax credit mechanisms and generally accepted accounting principles. The two tax incentive mechanism designs are consistent with differing views of the degree of financial constraints faced by firms in these economies. Their sample also allows them to explore the effects of capitalizing R&D on Canadian firms. Employing a matched design, they document relations between tax credit incentives and R&D spending consistent with both Canadian and U.S. public companies responding as though they are not financially constrained. They estimate that the Canadian credit system induces, on average, $1.30 of additional R&D spending per dollar of taxes forgone while the U.S. system induces, on average, $2.96 of additional spending. The authors also find that firms that capitalize R&D costs in Canada spend, on average, 18 percent more on R&D. Collectively, this evidence is important to the ongoing debates in both countries concerning the appropriate design of incentives for R&D and is consistent with the assumptions found in the U.S. tax credit system, but not those found in the Canadian system
Citation source
In: Contemporary Accounting Research. - Toronto. - Vol. 21 (2004), no. 3 ; p. 639-680
http://library.link/vocab/creatorName
  • Klassen, K.J
  • Pittman, J.A
  • Reed, M.P
Geographic coverage
North America
Language note
English
http://library.link/vocab/subjectName
  • tax incentive
  • tax credit
  • R&D
Label
A cross-national comparison of R&D expenditure decisions : tax incentives and financial constraints
Link
https://library.ibfd.org/custom/web/SD_PDF/scans/2004/A-D/CONTACRE/3_639-680.zip
Publication

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