This study examines the relationship between R&D tax incentives and innovation performance in selected OECD countries. In an environment of increasingly intense global competition, innovation has become a key determinant of sustainable economic growth, leading governments to rely more heavily on tax-based policy instruments to support R&D. However, the existing literature has not reached a clear consensus on the impact of R&D incentives on innovation, and long-run cross-country analyses remain relatively limited. Using a panel dataset covering 2007-2022, innovation performance is proxied by the Global Innovation Index, while R&D policies are analyses in terms of tax incentives, public R&D expenditures, and firm-level R&D financing. The empirical findings indicate that R&D tax incentives generally exert a positive effect on innovation performance in OECD countries. The impact of firm-level R&D financing on innovation outputs grows over time, whereas the contribution of public R&D expenditures appears more limited and sensitive to implementation conditions. Overall, the results suggest that the effects of R&D policies on innovation materialise not in the short run but in the long run through cumulative mechanisms. Long-term and comparative empirical evidence highlights that tax-based R&D incentives should be considered a central instrument in the design of innovation policies.
Nergis Feride Kaplan Dönmez (Tue,) studied this question.