R&D Investments and Tax Incentives: The Role of Intra-Firm Cross-Border Collaboration*
Jing Huang, Linda Krull, Rosemarie Ziedonis
Contemporary Accounting Research · 2020 · Volume 37 · Issue 4
Abstract
U.S. multinational corporations increasingly use intra-firm, cross-border research collaboration to disperse R&D across different countries. This paper investigates the implications of such collaboration on the abilities of firms to garner benefits from R&D tax incentives. We find that the association between R&D intensity and tax incentives is three to five times larger when firms have extensive cross-border collaboration connected to a country. We also find that the effect is stronger when local intellectual property protection is weaker and when local innovation resources are higher. Our results suggest that cross-border collaboration helps firms achieve more tax-efficient R&D investments both by reducing the nontax frictions posed by weak intellectual property protection and by increasing the nontax benefits of foreign R&D.
Keywords
R&D tax incentive, R&D investment, cross-border collaboration, incitatifs fiscaux à la R-D, investissements en R-D, collaboration transfrontaliére
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