Tax burden on open innovation: the case of the automotive industry in Brazil

Abstract

This study aims to use the concept of institutional distance to investigate the effects of tax burden, public tax incentives, company size and company age on the adoption of open innovation by automotive subsidiaries in Brazil. Building upon previous literature on innovation and institutions, we applied an ordinal logistic model to verify this relationship, which could influence the competitiveness of companies operating in a foreign country. We performed a survey with 130 subsidiaries to evaluate their impressions about the tax burden and the use of open innovation in their business strategies. Our findings suggest that a high distance of taxes increases the likelihood of the adoption of open innovation, and, surprisingly, the presence of tax incentives in Brazil does not increase the likelihood of adoption. Open innovation engagement seems to be related to behavioural factors rather than to structural ones.