Multinational Taxation and R&D Investments

A. de Waegenaere, R.C. Sansing, J.L. Wielhouwer

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

This study examines the effects of taxation on the incentives of multinational firms to develop and use intellectual property. We model optimal investment and production decisions by firms that engage in a patent race by making R&D investments. We investigate how taxes affect the level and efficiency of R&D investments, and how these effects depend on whether the winner of the patent race uses it by either producing in the country in which the patent was developed (the domestic country) or in a foreign country. A higher domestic tax rate decreases investment in R&D if production occurs in the domestic country, but increases investment in R&D if production occurs in the foreign country. The present value of domestic tax revenues is strictly positive if production occurs in the domestic country, but is weakly negative if production occurs in the foreign country.
Original languageEnglish
Pages (from-to)1197-1217
JournalThe Accounting Review
Volume87
Issue number4
DOIs
Publication statusPublished - 2012

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Multinationals
Taxation
Patent race
Incentives
Tax rate
Optimal investment
Present value
Multinational firms
Tax
Patents
Tax revenues
Intellectual property

Cite this

de Waegenaere, A. ; Sansing, R.C. ; Wielhouwer, J.L. / Multinational Taxation and R&D Investments. In: The Accounting Review. 2012 ; Vol. 87, No. 4. pp. 1197-1217.
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Multinational Taxation and R&D Investments. / de Waegenaere, A.; Sansing, R.C.; Wielhouwer, J.L.

In: The Accounting Review, Vol. 87, No. 4, 2012, p. 1197-1217.

Research output: Contribution to JournalArticleAcademicpeer-review

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