Thanks, but No Thanks: Companies’ Response to R&D Tax Credits

41 Pages Posted: 23 Jun 2016

See all articles by Daniel Neicu

Daniel Neicu

KU Leuven - Department of Managerial Economics, Strategy, and Innovation

Stijn Kelchtermans

KU Leuven - Department of Management, Strategy & Innovation; KU Leuven

Peter Teirlinck

KU Leuven

Date Written: June 2016

Abstract

This paper starts from the observation that the majority of firms in Belgium that were eligible for a newly introduced R&D tax credit system does not use it, or is slow to adopt, despite significant potential cost savings. We hypothesize that the R&D support landscape is complex for firms to navigate and that they may cope by relying on their peers’ behaviour to inform their own adoption decisions. We identify endogenous peer effects in industry- and location-based peer groups by exploiting the intransitivity in firms’ peer group networks as well the variation in peer group sizes. The results show that firms’ decisions to use R&D tax credits are indeed influenced by the choices of their peers, primarily in the time window following the introduction. Our analysis complements the literature on peer effects in firm decision making and suggests improvements for the communication of new public support measures for business R&D.

Keywords: R&D tax credits, peer effects, information diffusion, social interactions

Suggested Citation

Neicu, Daniel and Kelchtermans, Stijn and Teirlinck, Peter, Thanks, but No Thanks: Companies’ Response to R&D Tax Credits (June 2016). Available at SSRN: https://ssrn.com/abstract=2799546 or http://dx.doi.org/10.2139/ssrn.2799546

Daniel Neicu (Contact Author)

KU Leuven - Department of Managerial Economics, Strategy, and Innovation ( email )

Naamsestraat 69 bus 3500
Leuven, 3000
Belgium

Stijn Kelchtermans

KU Leuven - Department of Management, Strategy & Innovation ( email )

Warmoesberg 26
Brussels, 1000
Belgium

HOME PAGE: http://https://feb.kuleuven.be/Stijn.Kelchtermans/

KU Leuven ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

HOME PAGE: http://feb.kuleuven.be/eng/fetew/medewerker/userpage.aspx?PID=759

Peter Teirlinck

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

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