R&D Investments and Tax Incentives: The Role of Intra-Firm Cross-Border Collaboration

Posted: 23 Feb 2020

See all articles by Jing Huang

Jing Huang

Virginia Polytechnic Institute & State University - Pamplin College of Business

Linda K. Krull

University of Oregon

Rosemarie Ham Ziedonis

Boston University - Questrom School of Business

Date Written: January 14, 2020

Abstract

U.S. multinational corporations increasingly use intra-firm, cross-border research collaboration to disperse R&D across different countries. This paper investigates the implications of such collaboration on the abilities of firms to garner benefits from R&D tax incentives. We find that the association between R&D intensity and tax incentives is three to five times larger when firms have extensive cross-border collaboration connected to a country. We also find that the effect is stronger when local intellectual property protection is weaker and when local innovation resources are higher. Our results suggest that cross-border collaboration helps firms achieve more tax-efficient R&D investments both by reducing the nontax frictions posed by weak intellectual property protection and by increasing the non-tax benefits of foreign R&D.

Keywords: R&D tax incentive, R&D investment, Cross-border collaboration

JEL Classification: F23, H20, O32

Suggested Citation

Huang, Jing and Krull, Linda K. and Ziedonis, Rosemarie Ham, R&D Investments and Tax Incentives: The Role of Intra-Firm Cross-Border Collaboration (January 14, 2020). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3531246

Jing Huang (Contact Author)

Virginia Polytechnic Institute & State University - Pamplin College of Business ( email )

250 Drillfield Drive
Blacksburg, VA 24061
United States

Linda K. Krull

University of Oregon ( email )

1208 University of Oregon
Eugene, OR 97403-1208
United States
541-346-3252 (Phone)

Rosemarie Ham Ziedonis

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States

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