This paper is part of the Compendium of Evidence on the Effectiveness of Innovation Policy Intervention. It reviews the experience of business R&D tax incentives in OECD countries and presents findings on using this instrument for achieving certain R&D policy objectives. Based on economic and policy rationales for R&D tax incentives, design features of the instrument are discussed which contribute to its flexibility and its ability to address different policy objectives. The main part of the paper summarizes the results of evaluations of R&D fiscal incentives. Most studies focus on input additionality –the contribution of the tax incentive to increased business R&D expenditure while there is less evidence on output additionality – the effects of R&D tax incentives on innovation and economic impact. Evaluation results are linked to design features of the evaluated instruments to derive conclusions about how R&D tax incentives can be designed for meeting particular policy goals.
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