Intellectual Property Rights, Taxation, and Firms' Innovation: Theory and Evidence from China

29 Pages Posted: 31 Jan 2023

See all articles by Rongxin Xu

Rongxin Xu

University of Macau - Department of Economics

Yibai Yang

University of Macau - Department of Economics

Zhijie Zheng

Beijing Normal University - Zhuhai Campus

Date Written: January 13, 2023

Abstract

This study develops an R&D-based growth model with taxation to explore the heterogeneous effects of intellectual property rights (IPR) protection on innovation of firms with different tax rates. Our theoretical analysis shows that strengthening IPR stimulates innovation, and a higher tax rate dampens the positive effect of IPR. Moreover, we find supportive evidence for the theoretical result using firm-level data in China. Our empirical analysis shows that strengthening IPR is associated with less innovation by high-tax firms and more innovation by low-tax firms.

Keywords: Intellectual Property Rights; Taxation; Innovation; Economic Growth

JEL Classification: E62; H20; O30; O31

Suggested Citation

Xu, Rongxin and Yang, Yibai and Zheng, Zhijie, Intellectual Property Rights, Taxation, and Firms' Innovation: Theory and Evidence from China (January 13, 2023). Available at SSRN: https://ssrn.com/abstract=4343730 or http://dx.doi.org/10.2139/ssrn.4343730

Rongxin Xu

University of Macau - Department of Economics ( email )

Yibai Yang (Contact Author)

University of Macau - Department of Economics ( email )

Macau
China

Zhijie Zheng

Beijing Normal University - Zhuhai Campus ( email )

18 Jinfeng Rd, Xiangzhou Qu
Guangdong Sheng
Zhuhai Shi, Guangdong
China

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