Entrepreneurial innovations and taxation

Arbeitspapier

In many countries entrepreneurship is promoted through tax reductions for small businesses and by various government support schemes. We analyze the effects of such policies to subsidize small businesses in a setting where both the risk-return characteristics of the selected innovation project and the mode of commercialization chosen by entrepreneurs (market entry versus sale to an incumbent firm) are endogenous. We show that government programs to support small businesses foster market entry by entrepreneurs but, at the same time, give an incentive to choose low risk projects, due to the existence of limited loss offset provisions. This points to a basic trade-off between the goals of raising competition in technology-intensive markets and the desire of governments to foster risky 'breakthrough' innovations.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3473

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: business taxation ; innovation ; market entry ; Mittelstandspolitik ; Klein- und Mittelunternehmen ; Innovation ; Unternehmensbesteuerung ; Steuerbegünstigung ; Markteintritt ; Innovationspolitik ; Innovationswettbewerb ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Haufler, Andreas ; Norbäck, Pehr-Johan ; Persson, Lars
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/46562
• Last update: 10.03.2025, 11:45 AM CET