Tax Credits and Small Firm R&D Spending
45 Pages Posted: 27 Oct 2014 Last revised: 30 Oct 2024
Date Written: October 2014
Abstract
In 2004, Canada changed the eligibility rules for its Scientific Research and Experimental Development (SRED) tax credit, which provides tax incentives for R&D conducted by small private firms. Difference in difference estimates show a seventeen percent increase in total R&D among eligible firms. The impact was larger for firms that took the tax credits as refunds because they had no current tax liability. Contract R&D expenditures were more elastic than the R&D wage bill. The response was also greater for firms that invested in R&D capital before the policy change.
Suggested Citation: Suggested Citation
Agrawal, Ajay K. and Rosell, Carlos and Simcoe, Timothy S., Tax Credits and Small Firm R&D Spending (October 2014). NBER Working Paper No. w20615, Available at SSRN: https://ssrn.com/abstract=2515193
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