Taxes, Technology Transfer, and the R&D Activities of Multinational Firms

38 Pages Posted: 25 Jul 2007 Last revised: 27 Jun 2010

Date Written: November 1994

Abstract

Multinational firms that use domestic technologies in foreign locations are required to pay royalties from foreign users to domestic owners. Foreign governments often tax these royalty payments. High royalty tax rates raise the cost of imported technologies. This paper examines the effect of royalty taxes on the local R&D intensities for foreign affiliates of multinational corporations, looking both at foreign-owned affiliates in the United States and at American-owned affiliates in other countries. The results indicate that higher royalty taxes are associated with greater R&D intensity on the part of affiliates, suggesting that local R&D is a substitute for imported technology.

Suggested Citation

Hines, James Rodger, Taxes, Technology Transfer, and the R&D Activities of Multinational Firms (November 1994). NBER Working Paper No. w4932. Available at SSRN: https://ssrn.com/abstract=481491

James Rodger Hines (Contact Author)

University of Michigan ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States

NBER

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Cambridge, MA 02138
United States

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