Tax Credits and Small Firm R&D Spending

Ajay Agrawal, Carlos Rosell and Timothy S. Simcoe

No 20615, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In 2004, Canada changed the eligibility rules for its Scientific Research and Experimental Development (SRED) tax credit, which provides tax incentives for R&D conducted by small private firms. Difference in difference estimates show a seventeen percent increase in total R&D among eligible firms. The impact was larger for firms that took the tax credits as refunds because they had no current tax liability. Contract R&D expenditures were more elastic than the R&D wage bill. The response was also greater for firms that invested in R&D capital before the policy change.

JEL-codes: H2 H71 O25 O31 O38 (search for similar items in EconPapers)
Date: 2014-10
New Economics Papers: this item is included in nep-acc, nep-ino, nep-pbe, nep-pub, nep-sbm and nep-tid
Note: PE PR
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Citations: View citations in EconPapers (6)

Published as Ajay Agrawal & Carlos Rosell & Timothy Simcoe, 2020. "Tax Credits and Small Firm R&D Spending," American Economic Journal: Economic Policy, vol 12(2), pages 1-21.

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