TY - JOUR
T1 - A Win-Win-Win? Motivating innovation in a knowledge economy with tax incentives
AU - d'Andria, D.
AU - Savin, I.
N1 - Funding Information:
The first version of this work was written when both authors were employed at the Graduate College ?Economics of Innovative Change? (DFG RTG 1411) at the Friedrich Schiller University led by Uwe Cantner, to whom we are thankful for support and guidance. We would also like to thank Holger Graf, Silke ?belmesser, participants of the GENED Workshop at the Kiel Institute for the World Economy and the 15th International Schumpeter Society Conference and two anonymous reviewers for helpful comments and suggestions. IS also acknowledges support from the Helmholtz Association (HIRG-0069) and Projex CSES, Initiative d'Excellence, Universit? de Strasbourg. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They should not be attributed to the European Commission.
Publisher Copyright:
© 2017 Elsevier Inc.
PY - 2018/2
Y1 - 2018/2
N2 - In this study we explore effects of two distinct tax policies on innovation in a pure knowledge economy: an ‘IP box’ incentive and a (hypothetical) tax incentive on compensation earned by agents from profit sharing schemes (PSS). In contrast to the conventional assumption that firms decide on whether to innovate or not, we focus on a bottom-up innovation process (sometimes also called ‘bootleg innovation’), where firms set incentives to fulfill different tasks, but the final decision on whether to make the more innovative task is taken by an employee. We compare the two tax incentives under several distinct specifications demonstrating that the tax incentive on PSS can be a powerful mechanism fostering innovative activity and benefiting at the same time workers, firms and the economy as a whole. This study shows that the more critical for firms is attracting and motivating highly skilled workers, the larger the expected gain from employing the tax incentive on agents' compensation. We also find that the relative efficacy of this tax incentive is moderated by labor mobility and the extent of knowledge spillovers.
AB - In this study we explore effects of two distinct tax policies on innovation in a pure knowledge economy: an ‘IP box’ incentive and a (hypothetical) tax incentive on compensation earned by agents from profit sharing schemes (PSS). In contrast to the conventional assumption that firms decide on whether to innovate or not, we focus on a bottom-up innovation process (sometimes also called ‘bootleg innovation’), where firms set incentives to fulfill different tasks, but the final decision on whether to make the more innovative task is taken by an employee. We compare the two tax incentives under several distinct specifications demonstrating that the tax incentive on PSS can be a powerful mechanism fostering innovative activity and benefiting at the same time workers, firms and the economy as a whole. This study shows that the more critical for firms is attracting and motivating highly skilled workers, the larger the expected gain from employing the tax incentive on agents' compensation. We also find that the relative efficacy of this tax incentive is moderated by labor mobility and the extent of knowledge spillovers.
KW - Bottom-up innovation
KW - Financing of R&D investments
KW - Knowledge economy
KW - Profit sharing schemes
KW - Tax incentives for R&D
UR - http://www.scopus.com/inward/record.url?scp=85020175756&partnerID=8YFLogxK
U2 - 10.1016/j.techfore.2017.05.030
DO - 10.1016/j.techfore.2017.05.030
M3 - Article
AN - SCOPUS:85020175756
VL - 127
SP - 38
EP - 56
JO - Technological Forecasting and Social Change
JF - Technological Forecasting and Social Change
SN - 0040-1625
ER -