Biomedical Engineering Reference
In-Depth Information
Some of the other benefits of indirect support for research and
development achieved via tax incentives include less interference in
the market and therefore less risk of building artificial markets, less
bureaucracy, no arbitrary eligibility criteria, encouragement of
entrepreneurialism, no annual budget review and high levels of
political feasibility (Bozeman and Link, 1984). That is, a tax
incentive is argued to be easier to implement than a grants
programme, is less likely to be subject to political whim and relies
on private organizations to initiate the effort required. Conversely,
criticisms of tax incentives include that they reward organizations
for doing things that they would otherwise do anyway, create even
more inequalities, ultimately cost governments more than originally
planned and undermine government accountability (Bozeman and
Link 1984). Or, put another way, critics suggest that tax incentives
for research and development do less for economic growth than they
claim as they effectively pay companies for the innovative performance
that they should be conducting anyway if they want to survive.
Nevertheless, such strategies have been used widely across the
OECD. The US introduced the first research and engineering (R&E)
tax incentive in 1954 (Leyden and Link, 1993), while Australia has
had some form of research development tax rebate, offset, credit or
incentive in place since the mid-1960s (Leyden and Link, 1993).
From the early 1960s onwards, Canada has also implemented
different forms of tax incentives to encourage private investment in
research and development (Leyden and Link, 1993), and as of the
mid-1990s Belgium, France, Germany, Japan, Spain and Sweden
were also observed to have some form of incentive programme for
private research and development activities, although not always
administered through the tax system (Leyden and Link, 1993). Of
course, research and development tax incentives are not limited to
the OECD, with many countries outside the OECD also recognizing
the role that incentives for research and development play in
economic development (Leyden and Link, 1993).
Importantly, tax incentives are only one aspect among many that
contribute to a firm's innovative capacity (Leyden and Link, 1993).
Fair business rules also contribute to the strength of firms (Porter,
1990). Rules and regulations for starting up a new business have been
