R&D tax credit and operating performance: implications for managers

Abstract

PurposeThis paper aims to focus on helping managers understand a factor that stimulates investment in R&D, namely, the R&D tax credit.Design/methodology/approachThe paper uses a sample of firms in Taiwan; the study period is 1999‐2004. Four variables are used to categorize firms in life cycle stages, and these are ranked in a number of ways.FindingsIt is found that the R&D tax credit has an influence of operating performance and that the association of R&D tax credit with operating performance is moderated by the stage of the firm in its respective life cycle. This association is also moderated by the size of the firm.Practical implicationsManagement perspective, managers of small, older firms with sales that are stagnant or declining will benefit most from the R&D tax credit. Managers of such companies should make a greater effort to negotiate tax credits as they will benefit the most.Originality/valueThe paper adds to the literature on life cycle analysis