Entrepreneurial Innovations and Taxation

Arbeitspapier

Many governments promote small businesses for the dual reasons of fostering ‘breakthrough’ innovations and employment growth. In this paper we study the effects of tax and subsidy policies on entrepreneurs’ choice of riskiness of an innovation project and on their mode of commercializing the innovation (market entry versus sale). Limited loss offset provisions in the tax system induce entrepreneurs to choose projects with too little risk and this problem arises primarily when entrepreneurs market their product themselves. When innovations reduce only the fixed costs of production this leads to a fundamental policy trade-off between the declared goals of promoting employment and innovation in small, entrepreneurial firms. When innovations reduce variable production costs, policies to promote small businesses may even be unambiguously harmful.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IFN Working Paper ; No. 896

Classification and Topics

• Classification: Wirtschaft ; Business Taxes and Subsidies including sales and value-added (VAT) ; Oligopoly and Other Imperfect Markets ; New Firms; Startups ; Innovation and Invention: Processes and Incentives
• Subject: Entrepreneurship ; Innovation ; Corporate taxes ; Firm growth ; Mittelstandspolitik ; KMU ; Unternehmer ; Innovation ; Unternehmensbesteuerung ; Steuervergünstigung ; Markteintritt ; Innovationspolitik ; Innovationswettbewerb ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Haufler, Andreas ; Norbäck, Pehr-Johan ; Persson, Lars
• Event: Veröffentlichung
• (who): Research Institute of Industrial Economics (IFN)
• (where): Stockholm
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/81534
• Last update: 10.03.2025, 11:43 AM CET