Scandinavian Working Papers in Economics

Discussion Papers,
Statistics Norway, Research Department

No 565: The effects of R&D tax credits on patenting and innovations

Ådne Cappelen (), Arvid Raknerud and Marina Rybalka
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Marina Rybalka: Statistics Norway

Abstract: Norwegian business spending on R&D is low by OECD standards. To stimulate business R&D, in 2002 the Norwegian government introduced a tax-based incentive, SkatteFUNN. We analyze the effects of SkatteFUNN on the likelihood of innovating and patenting. Using a rich database for Norwegian firms, we find that projects receiving tax credits result in the development of new production processes and to some extent the development of new products for the firm. Firms that collaborate with other firms are more likely to be successful in their innovation activities. However, the scheme does not appear to contribute to innovations in the form of new products for the market or patenting.

Keywords: Tax credits; R&D; Patenting; Innovation; Self-selection

JEL-codes: C33; C52; D24; O38 November 2008

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