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IWH EXplore Competitive Funding for Research Projects with External Involvement at IWH IWH EXplore gives scientists the opportunity to acquire supplemental funding, in addition to…
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Our Projects 07.2022 ‐ 12.2026 Evaluation of the InvKG and the federal STARK programme On behalf of the Federal Ministry of Economics and Climate Protection, the IWH and the RWI…
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Vocational Training at IWH At the Halle Institute for Economic Research (IWH) the state-approved professions specialist in media and information services (m/f/x) [library] ,…
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Our Research Groups Banking, Regulation, and Incentive Structures Data Science in Financial Economics Econometric Tools for Macroeconomic Forecasting and Simulation Education,…
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Dr Wolfgang Sender Current Position since 5/24 Head of Public Relations Halle Institute for Economic Research (IWH) – Member of the Leibniz Association Activities press relations…
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IWH-Transfer Strategy IWH-Transfer Strategy (PDF, 230 kB) In accordance with its statutes, the IWH pursues an intensive bilateral knowledge transfer on the basis of excellent…
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Scicomm Support Services Scicomm supports and advises researchers and research communicators in the event of attacks and unobjective conflicts in research communication. Services:…
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IWH Discussion Papers
Submission and Revision of IWH Discussion Papers Please submit your paper for publication in the IWH Discussion Paper series to Stefanie Müller-Dreißigacker (…
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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.
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