R&D employment effects of financial slack generated by R&D tax exemption: The importance of firm-level contingencies

This paper focuses on R&D employment effects due to financial slack generated by an R&D tax exemption scheme in Belgium. The tax exemption is granted without firm-level requirements, which facilitates testing firm-level contingencies on the influence of the generated financial slack. We find that R&D employment effects increase with the level of the R&D tax exemption related to financial slack resources and that this positive relation is more outspoken for older firms and for firms with an intermediate share of R&D tax exemptions in the overall mix of R&D policy support. No effects are found for firm size and its R&D intensity. These findings suggest targeting the R&D tax exemption support according to firm characteristics to obtain longer term R&D employment effects. The focus on R&D employment adds to the literature on the evaluation of R&D policies which is largely oriented toward R&D expenditure and innovation outputs.