Do Corporate Taxes Hinder Innovation?

Published on: 2017-09-04

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Abhiroop Mukherjee and Alminas Zaldokas, HKUST IEMS Faculty Associates, examined how tax changes influence patenting activity in corporations, and found that tax increases would likely lead to lower innovation, but it would not be easy to reverse these losses quickly by cutting taxes back later.

Read the brief (PDF)

Key Points

  • Increases in corporate tax rates reduce innovation.
  • However, corporate tax cuts do not seem to increase innovation significantly, at least in the short run.
  • The effect of corporate taxes on innovation is consistent across R&D spending, patent filings and the introduction of new products by companies.
  • Our findings show an asymmetry when it comes to policies affecting innovation – discouraging innovation is easy, encouraging innovation is more difficult and might take time.

Related Content

[Bio] Abhiroop Mukherjee

[Bio] Alminas Zaldokas

[Event] Digital and Innovation in the Emerging Markets – EY-IEMS Network Workshop

[Event] Workshop on Challenges in Emerging Markets in the 21st Centur

[Event] China’s Patent Explosion by Richard Freeman

Photo by Asian Development Bank / Flickr. CC. https://flic.kr/p/HUmR5z

 

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