Abstract
The objective of this paper is to investigate whether the tax incentThe objective of this paper is to investigate whether the tax incentives for innovation in Brazil established by Law 11,196/05 (BRASIL, 2005) have altered the composition of firms’innovation investments and their results. Based on the concept of behavioral additionality and on the design of the policy, we derive three propositions on how these incentives affect the bundle of innovation expenditures, the educational level of researchers and the type of innovation pursued by firms. Using disaggregate data at firm level from the Brazilian Industrial Innovation Survey (PINTEC) of 2008 and 2011 and other sources, the average treatment effect on the treated (ATT) is estimated through propensity score matching with differenceindifferences. The main findings of the study are: (a) incentives had a positive impact on the research and development (R&D) intensity of innovation investments, increasing R&D spending by around 1,1 million Brazilian reais on average, while decreasing mean spending on acquisition of external knowledge and introduction of innovations in the market; (b) although the policy fostered additional hiring of researchers with undergraduate degree, no significant impact on personnel with master’s or Ph.D. degrees was found; and (c) there is no evidence of impact on the balance between product and process innovation.
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