Rogayeh Nazari; Godratoallah Emamverdi
Abstract
Innovators and investors often claim that there is a “funding gap” or “valley of death” in the middle phase of the process between basic research and commercialization of a new product. This gap or valley has a significant impact on the productivity of financial incentives to ...
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Innovators and investors often claim that there is a “funding gap” or “valley of death” in the middle phase of the process between basic research and commercialization of a new product. This gap or valley has a significant impact on the productivity of financial incentives to support R&D activities to move the technology toward commercialization. Financial incentives include tax incentives, subsidies, grants, and other incentives. Each company faces the marginal rate of return and the marginal cost of capital for R&D expenditures, which are influenced by public R&D policies. This research aims to apply the complexity of the microeconomic conceptual framework into a regional form using CES functions. Therefore, three regions of Europe (OECD), South East Asia and Central Asia are selected to compare the effects of financial incentives. For this purpose, spatial dynamic panel models for the period 2005–2016 is used. By confirming the SDM model, government fiscal incentives have internal, external and total impacts as supportive policies that can stimulate R&D activities and their funding. The positive and significant total effect of tax incentives on R&D was confirmed in OECD countries and positive external influence was affirmed in South East Asia, but for Central Asian countries, the effect of tax incentives was not confirmed. There is also an interactive (substitution) relationship between direct support and tax incentives in OECD countries. This relationship is complementary to South East Asia and Central Asia countries.
