R&D tax credit and operating performance: implications for managers

Purpose - This paper aims to focus on helping managers understand a factor that stimulates investment in R&D, namely, the R&D tax credit.Design methodology approach - The paper uses a sample of firms in Taiwan; the study period is 1999-2004. Four variables are used to categorize firms in life cycle stages, and these are ranked in a number of ways.Findings - It is found that the R&D tax credit has an influence of operating performance and that the association of R&D tax credit with operating performance is moderated by the stage of the firm in its respective life cycle. This association is also moderated by the size of the firm.Practical implications - Management perspective, managers of small, older firms with sales that are stagnant or declining will benefit most from the R&D tax credit. Managers of such companies should make a greater effort to negotiate tax credits as they will benefit the most.Originality value - The paper adds to the literature on life cycle analysis