Thinking Outside the Box: The Cross-border Effect of Tax Cuts on R&D

55 Pages Posted: 4 Nov 2016 Last revised: 29 Sep 2019

See all articles by Thomas Schwab

Thomas Schwab

University of Mannheim

Maximilian Todtenhaupt

Norwegian School of Economics (NHH)

Date Written: September 27, 2019


We provide evidence on the cross-border effect of tax policy on R&D activity. Combining administrative data on patent applications and transfers with corporate ownership information, we show that the direction and size of the cross-border effect depends on whether nexus (i.e. physical presence) is required to benefit from a tax cut. Tax cuts without nexus requirement create tax benefits across borders and generate a positive cross-border effect on R&D output. They also lead to subsequent patent transfers. Tax cuts with nexus requirements generate negative cross-border effects in sectors where the relocation cost of R&D activity is small.

Keywords: Taxation, Cross-border, Innovation, Multinational Firms

JEL Classification: F23, H25, O31

Suggested Citation

Schwab, Thomas and Todtenhaupt, Maximilian, Thinking Outside the Box: The Cross-border Effect of Tax Cuts on R&D (September 27, 2019). WU International Taxation Research Paper Series No. 2016-07; ZEW - Centre for European Economic Research Discussion Paper No. 16-073. Available at SSRN: or

Maximilian Todtenhaupt (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045

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