The Innovation Impacts of R&D Tax Credits in the <scp>UK</scp>
ABSTRACT Strategic managers of SMEs face a number of barriers to successful R&D, and the high cost of funding R&D projects due to their technological uncertainty is a critical one. To alleviate this problem, the UK government introduced R&D tax credits for firms with innovation projects that are scientifically or technologically uncertain in 2000, and this scheme has remained in place ever since. In this paper, we use a large longitudinal SME data set for the UK to test whether R&D tax credits have been successful in stimulating more innovation, whether they have impacted more on process or product innovation, and if they have promoted radical as opposed to incremental innovation. Our findings show that R&D tax credits are associated with product and process innovation, and also radical innovation of both types. It was also the case that the R&D tax credit effect took time to manifest itself in superior innovation outcomes. In general, the positive impact of R&D tax credits in the UK on firm‐level innovation is most apparent when firms also leverage external advice specifically related to innovation and strategy.
Authors
- Ning Zhang
- Weixi Liu (ORCID: https://orcid.org/0000-0002-9971-5748)
- Marc Cowling (ORCID: https://orcid.org/0000-0001-5731-8712)
Institutions
- Oxford Brookes University (GB)
- University of the West of England (GB)
- University of Bath (GB)
Publication Details
- Journal
- R and D Management
- Published
- 2025-07-18
- DOI
- https://doi.org/10.1111/radm.70008
- Primary Topic
- Innovation Policy and R&D
- Type
- article
- Field-Weighted Citation Impact
- 0.00
Funders
- UK Research and Innovation
- Economic and Social Research Council