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A Multilevel Analysis of the Effect of Taxation Incentives on Innovation Performance

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2 Author(s)
Erming Xu ; Sch. of Bus., Renmin Univ. of China, Beijing, China ; Kai Xu

This study investigates how government taxation incentives stimulate R&D expenditures from the organizational field level and accordingly improve innovation performance. Our results, based on an examination of 54 Chinese High-Tech industrial parks in the period of 2002-2008, suggest that government taxation affects industrial parks' R&D expenditure in a U-shaped way over time. Although government taxation incentives have a direct impact on R&D expenditure, the R&D expenditure growth patterns are different for industrial parks with high tax incentives and low tax incentives. Moreover, instead of finding that R&D expenditure has a direct influence on innovation performance as indicated by the previous literature, our study shows that the effect is time-lagged. This paper augments the current literature by providing empirical evidence and a theoretical understanding of regional innovation motivation.

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Engineering Management, IEEE Transactions on  (Volume:60 ,  Issue: 1 )