The Effects Of R&D Tax Incentives On Firms’ Innovations

Innovation is not only the core of China’s economic development strategy, but also an important way that our economic changes from resources consumption to innovation-intensive.Innovation is as the fundamental driving force of economic development, but also a measure of a country’s economic competitiveness of the core elements.We should stimulate firms to increase R&D expenditure so that promote to increase innovation. To achieve rapid economic growth and continuously enhanced competitiveness, it is necessary that promoting innovation. Therefore promoting technical innovation of firms has become one of the priorities of the governments’industrial and technological policies. Though there are lots of incentive measures, in which, tax incentives are the main policy tool for governments to promote firms to increase R&D investment.Since the late1980s, our government has also launched a series of tax incentives policy to encourage enterprises to increase R&D investment. From the initial the Notice of Financial and Tax Issues on Promoting Enterprise Technological Progress, Notice of the Interim measures about the technological transformation of domestic equipment investment enterprise income tax and several polices to encourage the software industries and intergrated circuit industry to develpment to the new Enterprise Income Tax Law, china’s R&D incentives policies have been gradually improving and been more reasonable.It will be benificial to government to make more effective policies to motivate corporrate innovation that study if these R&D incentives effectives promote corporate R&D inputs and innovation output. At the same time,it will be conducive to enterprise fully understand, recognize, imployment these R&D incentives policies, therefore these corporations will increase R&D investment and enhance core competitiveness.This paper examines the effects of R&D tax incentives on innovations of firms. We select the listed companies which have National-Recognized Enterprise Technology Centers as sample, and the2008-2011panel data as study object. The study applies the propensity matching approach to investigate the average effect of R&D tax incentives on a series of innovation outputs as patent, new products, etc. Our study shows that there exist three kinds of R&D tax incentives which are entitled the pretax additional deduction policy for enterprise’s R&D expenses, Super-tax burden of the tax rebate for software companies and VAT refund of domestic equipment. The demonstration indicates that compared with a hypothetical situation in the absence of R&D tax incentives, recipients of tax incentives have more patents, more new products and more Science and Technology Awards, but it also shows that there is no significant difference in business performance.