The Role of Peer Effects in Firms' Usage of R&D Tax Exemptions

48 Pages Posted: 8 Feb 2020

See all articles by Stijn Kelchtermans

Stijn Kelchtermans

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

Daniel Neicu

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

Peter Teirlinck

KU Leuven

Date Written: July 2019

Abstract

Survey evidence suggests that firms are insufficiently aware of newly introduced R&D support measures due to the complexity of the public support landscape. As a result, adoption is slow and incomplete, implying that eligible firms leave money on the table. We hypothesize that a key coping mechanism involves firms relying on their peers’ behaviour to inform their own adoption decision. We test this hypothesis by analysing firms' first use of a newly-introduced R&D tax exemption scheme in Belgium. We identify endogenous peer effects in industry- and location-based peer groups by exploiting the intransitivity in firms’ networks as well as variation in peer group size. The results show that firms’ decisions to use R&D tax exemptions are influenced by the choices of their peers. The findings suggest that the efficacy of R&D policy can be improved by accounting for the structure of firm networks in the communication of new support initiatives.

Keywords: peer effects, information diffusion, R&D tax exemptions, innovation policy

JEL Classification: D83, D85, L14, O38

Suggested Citation

Kelchtermans, Stijn and Neicu, Daniel and Teirlinck, Peter, The Role of Peer Effects in Firms' Usage of R&D Tax Exemptions (July 2019). Journal of Business Research, Vol. 108, 2020, Available at SSRN: https://ssrn.com/abstract=3519817

Stijn Kelchtermans (Contact Author)

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

Daniel Neicu

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

Naamsestraat 69 bus 3500
Leuven, 3000
Belgium

Peter Teirlinck

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

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