R&D tax credits,technology spillovers,and firms' product convergence |
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| Affiliation: | 1. School of Business Administration at Virginia Commonwealth University, United States of America;2. SKK Business School at SungKyunKwan University, South Korea;3. School of Management at the University of Texas at Dallas, United States of America;1. Central Bank of Chile, Agustinas 118, 8340454 Santiago, Chile;2. Hunter College & Graduate Center, City University of New York, 695 Park Ave, New York NY 10065, United States;1. Department of Accounting, Antai College of Economics and Management, Shanghai Jiao Tong University, 1954 Huashan Road, Shanghai, 200030, China;2. Department of Accounting, Business School, National University of Singapore, Mochtar Riady Building, BIZ 1, # 07-30, 15 Kent Ridge Drive, 119245, Singapore;3. Institute of Accounting and Finance, Shanghai University of Finance and Economics, No.777 Guoding Road, Shanghai 200433, China;1. Department of Finance, NUS Business School, National University of Singapore, 15 Kent Ridge Drive, BIZ 1 #7-63, 119245, Singapore;2. Department of Accounting, School of Economics and Management, Beihang University, 37 Xueyuan Road, Haidian District, Beijing, 100191, P.R. China;3. Division of Accounting, Nanyang Business School, Nanyang Technological University, 50 Nanyang Avenue, 639798, Singapore |
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| Abstract: | Using a difference-in-differences (DiD) setting that leverages the staggered adoption of R&D tax credits across the U.S. states, we show that after a firm receives the tax credits, products of its peers become significantly more similar to the recipient firm. Such product convergence is particularly strong when peer firms face greater pressure from market participants to uphold short-term performances. We further show that the effect of R&D tax credits likely works through the increased technology spillovers, which motivate peers to imitate instead of differentiating. Accordingly, we show that peer firms shift their patent composition from breakthrough to incremental innovations following the R&D tax subsidy. |
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