Taxes, R&amp;D Expenditures, and Open Innovation: Analyzing OECD Countries

Daniel Balsalobre-Lorente,Khurram Shehzad,José María Cantos-Cantos,Ayoub Zeraibi

doi:10.3390/joitmc7010036

Abstract

This paper aims to measure the effect of tax contributions in promoting innovation while highlighting the role of corporate taxes in governance quality in nations within and outside the Organization for Economic Co-operation and Development (OECD). The study applied the generalized method of moments (GMM) framework and found that good governance invariably increases the Innovation Index. Moreover, research and development expenditures revealed a positive association with the Innovation Index. However, corporate taxes and taxes paid by the business sector harm the Innovation Index. Following the investigation, we recommended that policymakers should plan well to balance the costs of innovation and tax incentives, to avoid stimulating unproductive innovations or affecting operating budgets.

Highlights

IntroductionA.; Shehzad, K.; In the past few years, innovation has become pivotal in the growth of economies
Zeraibi, A.; Shehzad, K.; In the past few years, innovation has become pivotal in the growth of economies.Economic agents’ interest in it plays a significant part in economic growth, especially in a developed country whose economy depends on innovation and technology [1]
Our study uses the Innovation Index, corporate tax rate, the number of taxes paid by businesses, and governance collected from the Global Economy database (2020), and the government research and development expenditures collected from the World

Summary

Introduction

A.; Shehzad, K.; In the past few years, innovation has become pivotal in the growth of economies. Economic agents’ interest in it plays a significant part in economic growth, especially in a developed country whose economy depends on innovation and technology [1]. Recent research focuses on the contribution of corporate taxes to innovation. It can be concluded that taxation is an essential instrument for promoting regional innovation activities; primarily, private enterprise tax is a useful tool that contributes to the development and promotion of innovation [2]. Many scholars have concluded that for a country to grow its economy and become competitive, innovation is essential for development, and is highly pivotal for economic growth [3,4]

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