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@article{Demirel:2026:10.1016/j.techfore.2026.124729,
author = {Demirel, P and Kesidou, E and Wu, L},
doi = {10.1016/j.techfore.2026.124729},
journal = {Technological Forecasting and Social Change},
title = {R&D tax credits and subsidies: implications for innovation novelty in emerging economies},
url = {http://dx.doi.org/10.1016/j.techfore.2026.124729},
volume = {230},
year = {2026}
}
TY - JOUR
AB - The impact of different policy instruments and policy mixes on innovation novelty remains unclear, particularly in emerging economies. This study contributes to the literature by examining the context-specific associations between innovation policies and different magnitudes of novelty in innovation outcomes. Our findings suggest that exposure to R&D tax credits is associated with increases in innovations that can be considered both as relatively more novel and less novel, in line with the market conforming design R&D tax credits that mimic firms' existing R&D portfolios. Conversely, R&D subsidies, often characterised by ‘picking the winners’, are mainly associated with relatively less novel innovation outcomes. We further show that policy mixes that involve R&D subsidies are more likely to support relatively less novel, domestic innovations. Building on Sanjaya Lall's technological capability approach, we propose a conceptualization of incremental innovation and argue that R&D subsidies should not be viewed merely as a misallocation of resources toward relatively less novel innovations at the expense of more novel alternatives. Instead, they should be seen as a context-specific policy mechanism for enabling emerging economies to build and accumulate the technological capabilities necessary for innovation. We empirically test these hypotheses using a unique longitudinal dataset (2013−2021) of 4162 publicly traded firms in China and estimate conditional treatment effects using a propensity score matching method. Our results underscore the nuanced and context-specific effects of R&D tax credits and subsidies on innovation novelty, offering new insights for innovation policy in emerging economies.
AU - Demirel,P
AU - Kesidou,E
AU - Wu,L
DO - 10.1016/j.techfore.2026.124729
PY - 2026///
SN - 0040-1625
TI - R&D tax credits and subsidies: implications for innovation novelty in emerging economies
T2 - Technological Forecasting and Social Change
UR - http://dx.doi.org/10.1016/j.techfore.2026.124729
UR - https://doi.org/10.1016/j.techfore.2026.124729
VL - 230
ER -