麻豆淫院

Firms that receive research and development (R&D) credits are much more likely to acquire venture capital (VC) backed startups, alongside investing in their own R&D efforts, according to new research by ESMT Berlin.

acquisitions of VC-backed firms. This clearly shows that if R&D taxation increases, firms are less likely to acquire startups.

Interestingly, larger organizations were only interested in using these tax credits to invest in startups who were VC-backed, ignoring firms that were not VC-backed.

"For firms that receive R&D credits, much of the spending will go on human capital i.e. wages and expenses for inventors," says Prof. Sevilir. "However, there is no guarantee here that this R&D investment will prove to be cost effective or even create any new developments. For larger firms, it can make more sense to acquire a startup who is already creating an innovative product or service, and help to fund their journey, as opposed to starting from scratch on their own."

For startups, the researchers say that this acquisition by a larger firm can be a huge positive to their organization. Startups typically lack the taxable income necessary to benefit from tax credits, therefore being acquired allows them to boost their growth and innovation capabilities through a greater cash injection.

While for firms, acquiring these high-performing startups allows them to diversify their R&D efforts, and likely improve their future potential innovations by using an outsourced team to invent, as well as their own.

The researchers say that this reallocation effect of R&D tax credit-induced M&A activity by established firms plays a significant role in supporting startups, which have a high need for capital but limited access to it.