A study on R&D expenditure decisions in developing economies: Tax incentives and earnings
The significant economic externalities of private companies performing R&D justify the provision of special tax incentives, even in developing economies. We provide evidence on the impact of tax incentives and financial constraints on corporate R&D expenditure decisions. Exploiting cross-cou...
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| Main Authors: | , , , |
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| Format: | text |
| Language: | English |
| Published: |
Animo Repository
2016
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| Subjects: | |
| Online Access: | https://animorepository.dlsu.edu.ph/etd_bachelors/9937 |
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| Institution: | De La Salle University |
| Language: | English |
| Summary: | The significant economic externalities of private companies performing R&D justify the provision of special tax incentives, even in developing economies. We provide evidence on the impact of tax incentives and financial constraints on corporate R&D expenditure decisions. Exploiting cross-country differences in Malaysia, Indonesia and the Philippines, we appraise the impact and cost-effectiveness of the R&D tax incentives implemented. We find, for 275 Malaysian firm- years, 68 Indonesian firm-years and 68 Philippine firm-years, that R&D tax incentives of Malaysia have a positive impact on the level of R&D spending and are cost-effective as its credit system induces, on average, $2.005 of additional R&D spending per dollar of taxes forgone. Consistent with the R&D investment model, providing tax incentives in the form of tax credit will decrease financial constraints that may limit the total investments made, and allow more R&D projects to be undertaken. This evidence has important implications for governments to adopt a similar tax policy providing constant incentives that can encourage private R&D investments |
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