A Study On The Impact Of R&D Expense Deduction Policy On Total Factor Productivity Of Enterprises

As China’s economy has entered a phase of transformation from high growth to high quality growth,the current level of social and economic development still needs to be improved due to many factors such as resource and environmental constraints and labor costs.Therefore,the government has formulated and improved a package of tax incentives to promote total factor productivity so as to promote high-quality socio-economic development,especially the new policy of adding deductions for R&D expenses introduced in 2016,which has a wide coverage and is highly representative.But whether this policy will have any practical effect and whether the dynamics of the companies themselves will have a different impact on the effect of the policy are yet to be studied in depth.Therefore,this paper is devoted to exploring the effect and transmission mechanism of the new policy of R&D expense deduction on the total factor productivity of enterprises under a life-cycle perspective,and providing suggestions for further improving and enhancing the total factor productivity of enterprises based on the empirical results obtained.The research idea of this paper is divided into the following parts: first,to determine the research objectives,in the existing domestic and foreign literature to organize,to find the shortcomings in existing research,and on this basis to identify the key points to solve the problem while clarifying the research direction;second,based on economic growth and technological innovation theory,market failure theory,tax incentive theory and enterprise life cycle theory,we investigate the mechanism of the policy’s effect on total factor productivity from the perspective of enterprise R&D cost and R&D risk,and analyze the moderating effect of enterprise life cycle between the policy and enterprise total factor productivity,and explore the difference of the policy’s effect on enterprises in different life stages.In addition,based on the theoretical mechanism analysis in the previous section and combined with the findings on the role of financing constraints and R&D investment on total factor productivity in the existing literature,it provides the basis for the channel test conducted in the latter section;third,using the double difference method,the expansion of the application of the R&D expense deduction policy in 2016 is taken as an external shock event,and the total factor productivity of enterprises measured by the LP method is used as an indicator,on which the regression equation is established using the double difference method to study the impact of this policy on the total factor productivity of enterprises,and the samples are grouped according to different life cycles to explore the differences in the effect of this policy on the total factor productivity of enterprises under different life stages;in addition,the robustness of the research model is tested in terms of parallel trend test,replacement of explanatory variables,randomly generated experimental groups and changing the life-cycle division method;then,we build on the existing foundation to explore the different effects of this new policy on enterprise heterogeneity at different life cycle stages;finally,a mechanistic test of financing constraints and R&D investment is performed.An analysis of the empirical results reveals,firstly,that this policy does increase the total factor productivity of firms;secondly,the life cycle its impact process plays a moderating role and this policy is the most significant in promoting mature firms;thirdly,from a life cycle perspective,this policy is better for mature non-SOEs than mature SOEs;fourthly,the empirical results show that this policy not only has an incentive effect on mature firms,but also has a boosting effect on the total factor productivity of large-scale firms in the growth period;fifthly,from the perspective of regional heterogeneity in the degree of marketization,it can be found that this policy has a significant boosting effect on the total factor productivity of firms in the growth period in regions with a low level of marketization;sixthly,the results of the mechanism test suggest that the policy aims to promote total factor productivity by increasing investment in R&D and reducing financing constraints.Combining the above theoretical analysis and empirical results,this paper further proposes suggestions for improving the current policy from the perspectives of both enterprises and the government respectively.From the government’s point of view,on the one hand,the government can suitably modify the policy on the deduction of R&D expenses in the general direction for different life cycles and different types of enterprises,so as to enhance the applicability and relevance of the policy;on the other hand,the government should also strengthen the tax supervision during the implementation of the policy to reduce the rent-seeking behaviour of enterprises.From the perspective of enterprises,while enjoying the policy dividends,they should also regulate their own behaviour,further optimise their resource allocation structure and improve their management,so as to fundamentally promote their good development.