This study assesses the impact of research and development (R&D) tax incentives on the intensity of business R&D expenditure in Central and Eastern European countries and derives policy implications for Ukraine. The analysis uses a balanced panel of 11 new EU member states covering the period 2010–2023, based exclusively on officially published data. The main method is a two-way fixed-effects panel regression with country and year effects, clustered standard errors, alternative lag structures, heterogeneity analysis and robustness checks. The baseline specification shows that a 0.10 increase in the implicit subsidy rate is associated with an approximately 0.10 percentage point increase in Business Expenditure on R&D (BERD) to GDP two years later. However, the effect is strongly conditional on absorptive capacity: it is statistically significant in countries with a developed R&D base and practically absent in countries with a weak base. The estimated private R&D additionality ratio falls below one under the stated assumptions, indicating that the estimated effect does not imply more than one unit of additional private investment per unit of fiscal support. For Ukraine, the results support a gradual introduction of R&D tax incentives combined with structural measures that strengthen human capital, institutional capacity and links between science and business.
Stavytskyy et al. (Thu,) studied this question.