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Dipping in the policy mix: Do R&D subsidies foster behavioral additionality effects of R&D tax credits?

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We analyze how behavioral additionality effects of wage-based R&D tax credits are influenced by the firm's joint use of R&D subsidies. Using matching estimators and a multivariate probit analysis of cross-sectional survey data on Belgian firms, we find that R&D subsidies induce tax credit users to focus more strongly on research relative to development and to accelerate the execution of R&D projects. To a slightly lesser extent, we also find size effects, firms scaling up current R&D or initiating additional projects. Overall, these findings suggest that companies that benefit from the ‘policy mix’ respond more strongly to R&D tax credits and use the tax-exempted resources to adopt a more strategic approach to R&D.
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Keywords: Behavioral additionality; D01; D03; D04; D78; R&D policy mix; R&D subsidies; R&D tax credits

Document Type: Research Article

Affiliations: Faculty of Economics & Business, KU Leuven, Campus Brussels, Warmoesberg 26, Brussels, 1000, Belgium

Publication date: April 2, 2016

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