Tax incentives have a significant impact on the development of equipment manufacturing enterprises in the era of economic transformation.
This paper explores the impact of tax incentives on R&D investment in the equipment manufacturing industry from the perspective of “enterprise life cycle”, based on data from Chinese equipment manufacturing enterprises from 2011 to 2022.
The study finds that: (1) Overall, tax incentives significantly promote the equipment manufacturing industry to increase R&D investment, and this effect remains significant under various robustness tests; (2) The impact of tax incentives on R&D investment differs in different life cycles: firstly, the strongest impact occurs during the maturity period, followed by the decline period, with the weakest impact in the growth period;(3) Further study explores the mechanisms, finding that tax incentives affect profits through internal incentives and compliance effects, and impact costs through externality and deterrence effects, ultimately influencing R&D investment in equipment manufacturing industry. Causal identification through difference-in-difference method is found to be consistent with the conclusion of the benchmark regression; (4) The impact of tax incentives on R&D investment varies among enterprises with different technological levels, industries and life cycles.
These research results will help the government develop targeted tax incentive policies for different life cycle enterprises, and also improve policy support for other developing countries.
