Direct subsidies or tax credits? The effects of different R&D policy tools

Zhenzhen Xie, Luqun Xie, Jiatao Li

Research output: Journal PublicationArticlepeer-review

8 Citations (Scopus)


Governments increasingly recognise the benefits of direct subsidies and tax credits for supporting private sectors to adopt research and development (R&D) activities. However, the different reactions of firms toward these two types of measures have remained with advance financial support, whereas tax credits wait until the R&D expense has been incurred to pay back. Thus, the former is better at attenuating risk, but leaves recipients with less discretion in their research efforts. Firms with more financial resources can more easily overcome such constraints. Tax credits provide more flexibility to using the money. This can be especially beneficial for firms whose financial resources are limited. These ideas were tested using data on research support and research outcomes describing 2,748 Chinese firms in Beijing Zhongguancun Science Park between 2012 and 2015. Analyses of those data delivered support for the preceding arguments.

Original languageEnglish
Pages (from-to)25-43
Number of pages19
JournalInternational Journal of Technology Management
Issue number1
Publication statusPublished - 2021
Externally publishedYes


  • China
  • Innovation performance
  • Policy effectiveness
  • Subsidies
  • Tax credits

ASJC Scopus subject areas

  • Industrial relations
  • General Engineering
  • Computer Science Applications
  • Strategy and Management
  • Law


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