Abstract Data for a sample of U.S. manufacturing firms are used to develop effective rates of research and development (R&D) credit using the tax provisions for a number of the major industrialized nations. Rates are compared using Analysis of Variance (ANOVA). The effects of the credit on changes in R&D intensity (R&D/Sales) are also evaluated by way of two stage least square regression. The reported results show that the U.S. rate of credit is below that of many of its foreign counterparts, such as Japan, Canada, and France. Canada has the most generous rate of credit followed by Japan, France, and, lastly the United States. The foreign counterparts also offer other tax and non-tax incentives not offered in the United States. In addition, the effective rate of the U.S. credit is shown to have a significant effect on changes in R&D intensity of the firm.
Billings et al. (Tue,) studied this question.