R&D tax credits and the acquisition of startups

Arbeitspapier

We propose a novel mechanism through which established firms contribute to the startup ecosystem: the allocation of R&D tax credits to startups via the M&A channel. We show that when established firms become eligible for R&D tax credits, they increase their R&D and M&A activity. In particular, they acquire more venture capital (VC)-backed startups, but not non-VC-backed firms. Moreover, the impact of R&D tax credits on firms' R&D is increasing with their acquisition of VC-backed startups. The results suggest that established firms respond to R&D tax credits by acquiring startups rather than solely focusing on increasing their R&D intensity in-house. We also highlight evidence that startups do not appear to benefit from R&D tax credits directly, perhaps because they typically lack the taxable income necessary to directly benefit from the tax credits. In this context, established firms can play an intermediary role by acquiring startups and reallocating R&D tax credits, effectively relaxing the financial constraints faced by startups.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IWH Discussion Papers ; No. 15/2023

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Financial Economics: General ; Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance ; Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes ; New Firms; Startups ; Innovation and Invention: Processes and Incentives
• Thema: indirect effects ; innovation ; mergers and acquisitions (M&A) ; research and development (R&D) ; startups ; tax credits

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): McShane, William ; Sevilir, Merih
• Ereignis: Veröffentlichung
• (wer): Halle Institute for Economic Research (IWH)
• (wo): Halle (Saale)
• (wann): 2023

Weitere Informationen

• Handle: http://hdl.handle.net/10419/273323
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ