The effects of state R&D tax credits in stimulating private R&D expenditure: A cross‐state empirical analysis

This is a cross‐state empirical study which examines the effects of state research and development (R&D) tax credits on private R&D expenditure in the states. Other explanatory variables include federal R&D subsidies, public services in higher education and R&D‐targeted programs as well as other control variables. The statistical result shows that the establishment of state R&D credit programs is effective in stimulating more industrial R&D expenditure. In addition, state services in higher education and R&D‐targeted programs also matter in private decision of R&D investment. This policy assessment sends a positive message to state policymakers because it shows the great potential in using R&D policy instruments to promote innovation‐based economic development. © 2005 by the Association for Public Policy Analysis and Management     

Unbundling R&D and Manufacturing: Postindustrial Myth or Economic Reality?

Understanding determinants of business location decisions is important from the point of view of economic policy. While the determinants of manufacturing and R&D location have been extensively covered in the literature, in this article we examine a largely neglected question: Under what conditions do manufacturing and R&D have to be physically colocated, that is, when is unbundling the two impossible? In a sample of 241 Finnish industrial firms, we find that unbundling R&D and manufacturing is possible for some companies but indeed a postindustrial myth of sorts for many others. The need for colocation correlates with knowledge intensity of activities: product complexity, process complexity, and industry rate of change, but interestingly enough, not with the size of the firm's R&D budget.     

The Persistence of Home Bias for Important R&D in Wireless Telecom and Automobiles

We argue that in this age of globalization, important R&D—in automobiles and wireless telecommunication—exhibits a decisive home bias. This contrasts with findings on the rate and extent of globalization of the aggregate of activities classified as R&D. Sorting out R&D was deemed important at the outset by the firm, and comparing that to "regular" R&D by the same firms enables the argument. We take our findings on location a step further by examining, for this category of R&D, the reasons for nonglobalization.     

Effectiveness of fiscal incentives for innovation: Evidence from meta‐regression analysis

This article examines the microeconometric evidence on the impact of government support for R&D and innovation. Our meta‐regression analysis uses a dataset of empirical evidence on the effects of government R&D policies on innovation and investigates the factors that may explain the differences in the estimated effects. The meta‐analysis is structured to include both the direct and indirect government support for R&D and innovation. The estimated results reveal the heterogeneity of empirical studies with respect to the type of incentive, data, and econometric methodology used. The results indicate that the output additionality effect is on average stronger for R&D tax incentives than subsidies. Studies that use the subsample of high technology sector show a stronger additionality effect of fiscal incentives on innovation. Moreover, small and medium enterprises have a stronger input additionality effect. The results also suggest that studies considered endogeneity issues have on average stronger additionality effect.     

Local government,industrial policy and social consensus: the case of Modena (Italy)

The ‘Emilian model’ has become well known as a case of rapid economic growth based on small firms concentrated in ‘industrial districts’. This paper gives a detailed account of three local industrial policy initiatives adopted in Modena, one of the provinces of Emilia-Romagna in which the features of the model appear clearest. The policy of industrial parks was intended to make land available to firms for their orderly development; the loan guarantee consortium aimed to secure special financing for small firms; and the creation of ‘real service centres’ was directed towards supplying information on technology and markets to industrial districts specializing in particular sectors. In addition to describing these interventions, the paper also seeks to demonstrate that a climate of social consensus and strong credibility on the part of local government are necessary prerequisites for the success of local industrial policies.     

Social Security Amendments of 1977: legislative history and summary of provisions

This article describes the legislative history of the Social Security Amendments of 1977 and contains a summary of the amendments. The major provisions revise the benefit structure so that future replacement rates--initial benefits as a percent of previous earnings--will be relatively stable and revise the tax structure to restore the financial soundness of the program in the short range and into the 21st century. Other significant provisions include: An increased special minimum benefit for long-term workers with future automatic adjustment to prices; a minimum benefit frozen at the December 1978 level (roughly $121) with automatic adjustment only for those on the rolls; a higher retirement test exempt amount of beneficiaries aged 65 and over; an annual measure of "quarter of coverage" and other changes in annual wage reporting provisions; and authorization for agreements with foreign countries for limited coordination between social security systems.     

Tax Toleration and Tax Compliance: How Government Affects the Propensity of Firms to Enter the Unofficial Economy

How do government‐supplied institutional benefits and the taxation and regulation of producers affect the propensity of private firms to enter the unofficial economy and evade taxation? We propose a model in which the incentive of firms to operate underground depends on tax rates relative to firm‐specific thresholds of tax toleration that are decisively affected by quality of governance—in particular by the presence of high‐grade institutions delivering services enhancing official production that anchor profit‐maximizing firms to the official economy. Some key predictions of the model concerning the determinants of firms' tax toleration and tax compliance receive broad support from empirical analyses of enterprise‐level data from the World Bank's World Business Environment Surveys.     

The effects of different entry modes of foreign direct investment on labor rights in the developing world

Although many studies have investigated the effects of foreign direct investment on labor rights in the developing world, no studies of which we are aware have considered how differences in the mode of entry—that is, mergers and acquisitions (M&As), cross-border joint ventures (JVs), and greenfield investments (GIs)—taken by multinational corporations affect labor rights in host countries. Using panel data for up to 113 developing countries from 1985–2002, we find that foreign firms that enter via M&As tend to have minimal, or slightly negative, effects on labor rights, whereas JVs and GIs support improvements in workers’ rights. Overall, the results suggest that the sectors and motivations associated with JV and GI modes of entry increase labor demand, improving the bargaining power of workers.     

The Tax Revolt in Massachusetts: Revolution and Reason

The modern-day tax revolt in Massachusetts was initiated by passage of the property tax limitation measure Proposition 2½ in 1980. Predictions of draconian budget cuts never materialized due to state legislative modification of the initiative's provisions, and judicious use of local voter overrides. Massachusetts citizens have continued to bring tax issues to the ballot, with fairly reasoned outcomes.     

Tax Expenditure Budgets, Budget Policy, and Tax Policy: Confusion in the States

A tax expenditure budget should contribute to efficient and effective public decisions by quantifying the division in the tax structure between provisions that represent revenue policy (distribute the cost of government according to the legislated tax base) and parts that represent budget policy (substitute for direct spending). For this transparency to have the desired impact, however, the tax expenditure budget process and the direct expenditure process must be properly integrated and the tax expenditure budget must make an accurate division between the parts of the tax structure. A review of the 33 states with tax expenditure systems shows many weaknesses in application of the concept and poor linkage to the direct spending budget system. Their most significant flaw is in dividing the tax structure into normal and preference elements; states need greater attention to defining their basic tax structure if they are to have a meaningful tax expenditure budget.     

Do Industrial Tax Abatements Spur Property Value Growth?

Despite ongoing debate regarding the effectiveness of tax abatements, Michigan's Industrial Facilities Tax (IFT) abatement program has been widely and extensively used to boost local economic development. In this article, we estimate the effects of industrial property tax abatements on industrial, residential, and commercial property value growth in the context of regional competition for a panel of 152 communities in the five counties surrounding Detroit from 1983 through 2002. We find that: (1) offering tax abatements yields statistically significant positive impacts on industrial property value growth; (2) the impacts are larger in high tax than in low tax communities; (3) there are positive spillover effects of industrial tax abatements on residential and commercial property value growth; (4) tax abatements offered in competitor communities do not appear to influence own industrial property value growth; and (5) changes in the own as well as competitor property tax rates are important determinants of industrial property value growth. However, the fiscal benefits of tax abatements are quite small as compared with the costs of offering abatements even when spillover benefits to residential and commercial properties are considered.     

Workers' compensation and the governance of pain

This article examines the medico-legal systems of workers' compensation. It is divided into three parts, the first taking an historical perspective to locate the first workers' compensation laws, the circumstances which led to their implementation, and their consequences in terms of the shift from individual fault to industrial risk. In the second part, the discursive practices of medico-legal knowledge-power typically found in workers' compensation systems are examined, especially the principles and clinical practices that are deployed to 'police' the boundaries of such schemes and to mitigate costs. Part three then summarizes the effect of neo-liberal governmentality and its underlying economic rationality as it attempts to regulate, by means of the artifice of liberty, the behaviours of firms and workers. Workers' compensation deserves analysis for the special technical and insurantial problems it entails, given its complex triangular insurance relation (involving the insurer, the firm, and the worker), its deployment of medical, economic and actuarial knowledges, and its production of special problems and uncertainties surrounding the governing of a class of persons incapacitated for productive work.     

An Exploratory Study on International R&D Strategies of Chinese Companies in Europe

We here present a study that arms the reader with various discussion points on the research and development (R&D) foreign direct investment (FDI) strategies of Chinese multinational corporations (MNCs) in Europe. Through archival research and interviews, we adopted a multi‐case study approach to investigate how significant are these investments and how relevant do they become for the local innovation systems. Our analysis shows that the establishment of R&D centers, and more importantly the evolution of these centers, does not coincide with what international business theories would have predicted. The Chinese MNCs considered entered Europe in a variety of forms, guided by various learning goals. However, we found evidence of the growing tendency of these companies to insulate themselves from local partners and to engage in less explorative and more exploitative R&D activity, adapting technologies developed elsewhere for the European market, gaining access to good indigenous labor and technologies rather than to local partnerships.     

National Institutions and the Globalized Political Economy of Technological Change: An Introduction

In the last three decades research across the social sciences has made great advances in the political economy of technological change. Nonetheless, many of these insights are solely tied to national, sometimes regional, explanations of industrial R&D and innovation rates. Meanwhile, the impacts of the international system, and of the actions of individual countries, on technological changes across many countries, are increasingly more pronounced. It is therefore imperative that we expand our theoretical conceptualizations. For these reasons we have gathered, in this special issue, economists, political scientists, geographers, and sociologists to explore in a comparative way what we view as some of the critical areas for research at two different level of analysis—business and nations. This introduction will outline their major research themes and provide a brief history of the debate.     

How Quickly Do Corporations Respond to Changes in Tax Law? Evidence fromthe California Manufacturer's Investment Credit

An understanding of the timing of firm response to changes in corporate tax law is vital for accurately estimating the revenue impact of pending corporate tax legislation. Unfortunately, the literature does not contain any standard references describing the actual responses of firms to tax law changes. The recent adoption of California's Manufacturer's Investment Credit provides a unique opportunity to study how corporations adjust their tax payments in response to changes in tax law. For background, it is shown that even in the absence of law changes many corporations overpay on their estimated taxes, perhaps because of transactions costs or agency problems. Analysis of corporate tax payments indicates that taxpayers did adjust their estimated tax payments in response to the introduction of California's MIC, but that their response fell short of the response predicted by the zero transactions cost, perfect information model of the firm. Furthermore, firms whose MIC credit was large relative to their pre-MIC tax liability were less adept at adjusting to the law change than were firms for whom the MIC was relatively less important. As a result, the revenue loss to the State of California for 1995 tax year MIC credits is estimated to be spread out over four fiscal years.     

Determinants of Business Response to Government Tax Incentives for Privately Financed Termination Benefit Programs

This study examines the industry and organizational factors that determine the likelihood of business response to government tax incentives for privately financed termination benefit programs and the substitution problems confronting government programs that use tax incentives to encourage businesses to provide these benefits to their employees. It concludes that government tax incentives will likely have marginal effects on the private provision of termination benefits, especially in large firms in industries with a strong market presence from government. These programs most likely will get high participation from large firms which already provide these benefits to salaried and hourly workers resulting in high substitution effects. They also are likely to extend benefits to hourly employees in firms that already provide similar benefits to salaried workers. However, these tax incentives are likely to have very limited inducement effects on small and medium-sized firms resulting in low overall target efficiency for these programs.     

Lobbying and Taxes

Lobbying dominates corporate political spending, but comprehensive studies of the benefits accrued are scarce. Using a dataset of all U.S. firms with publicly available financial statements, we delve into the tax benefits obtained from lobbying. Firms that spend more on lobbying in a given year pay lower effective tax rates in the next year. Increasing registered lobbying expenditures by 1% appears to lower effective tax rates by somewhere in the range of 0.5 to 1.6 percentage points for the average firm that lobbies. While individual firms amass considerable benefits, the costs of lobbying-induced tax breaks appear modest for the government.     

New capitalist processes,interdependence and the Asia–US private equity relationship

Abstract

Private equity has had a short but eventful history in East Asia, characterized first by US firm dominance and then by a nationalistic backlash. This article charts these earlier patterns, but argues that significant developments have taken place since the early 2000s, which have strengthened the position of private equity capital in the Asian political economy. As private equity deal-making has returned to Asia, new linkages have been formed between US private equity funds and local private equity players. Of particular importance have been US–Asian joint ventures, Asian nationals returning to domestic firms from US private equity houses and supportive local elites in the banking and pension fund sectors. The significance is two-fold. First, the spread of private equity has been founded on interdependent relationships between US actors and local actors, which have more successfully grounded the private equity industry in national political economies than its origins in the Asian crisis period. Second, despite the relative localization of Asian private equity, industry practices are still largely shaped by the US model of private equity and the merger and acquisition activity that it entails, rather than a distinct Asian private equity model. The findings of the article contribute to calls that have been made for research on the changing global economy that comprehensively integrates domestic and international levels of analysis.     

发达国家科技预算管理体制及对中国的启示

国家科技预算体制是决定一个国家科技发展的重要因素.分析了发达国家所实行的科技预算体制的不同模式,并对其所依赖的基础作了分析.发达国家的科技预算体制有一些共同点,如大都有较好的科技预算协调机制,大都有一个在科技预算中起重要作用的部门,但似乎不存在最优的科技预算体制.发达国家的科技预算较分散,而追赶性国家的科技预算较集中.分析了发达国家科技预算体制对中国的启示,认为中国应该采取相对集中的科技预算管理体制,但要加强跨部门的协调,减少重复分散,最后提出了自己的建议.     

American state governments as models for national science policy

In the 1980s state governments adopted an entrepreneurial stance and established an extensive array of programs targeted at encouraging university industry research collaboration, the commercial development of new technologies, the start-up of new firms, and the technological modernization of existing firms. Although these state programs are frequently presented as laboratories of democracy, their relevance to national science and technology policy is open to question. State R&D strategies reflect contrasting theories about the linkages among academic research, technological innovation, economic growth, and administrative practices. Evaluations of state technology programs have essentially remained fixed at dead center, as unproven undertakings. State experiences have not been couched in analytical frameworks conducive to assessments of national science and technology policies.