R&D Tax Credits and the Acquisition of Startups
William McShane, Merih Sevilir
IWH Discussion Papers,
No. 15,
2023
Abstract
We propose a novel mechanism through which established firms contribute to the startup ecosystem: the allocation of R&D tax credits to startups via the M&A channel. We show that when established firms become eligible for R&D tax credits, they increase their R&D and M&A activity. In particular, they acquire more venture capital (VC)-backed startups, but not non-VC-backed firms. Moreover, the impact of R&D tax credits on firms’ R&D is increasing with their acquisition of VC-backed startups. The results suggest that established firms respond to R&D tax credits by acquiring startups rather than solely focusing on increasing their R&D intensity in-house. We also highlight evidence that startups do not appear to benefit from R&D tax credits directly, perhaps because they typically lack the taxable income necessary to directly benefit from the tax credits. In this context, established firms can play an intermediary role by acquiring startups and reallocating R&D tax credits, effectively relaxing the financial constraints faced by startups.
Read article
Homepage
Headwinds from Germany and abroad: institutes revise forecast significantly downwards According to Germany’s five...
See page
Productivity
Productivity: More with Less by Better Available resources are scarce. To sustain our...
See page
Professor in Finance and Labor in conjunction with a position as Senior Research Advisor at the Department of Laws, Regulations and Factor Market
Vacancy Professor in Finance and Labor in conjunction with a...
See page
Department Profiles
Research Profiles of the IWH Departments All doctoral students are allocated to one...
See page
Wiederhold wp
Does Information about Inequality and Discrimination in Early Child Care Affect Policy Preferences? ...
See page
Archive
Media Response Archive ...
See page
People
People Job Market Candidates Doctoral...
See page
IWH FDI Micro Database
IWH FDI Micro Database The IWH FDI Micro Database (FDI = Foreign Direct...
See page
East Germany
The Nasty Gap 30 years after unification: Why East Germany is still 20% poorer than the...
See page