Government Incentives for Innovation and Entrepreneurship : An International Experience

This book examines the role of government fiscal and non-fiscal incentives in spurring innovation and entrepreneurship in developed and developing economies. It explores and examines the role of government programs in different stages of firm growth pre-startup, startup, and scale-up. By developing a theoretical framework and reviewing international evidence, the book identifies the best combination of government incentives to stimulate innovation and entrepreneurship, and provides concrete policy recommendations for decision-makers. Some of the issues tackled in this book include national innovation policy, innovation support programs, effectiveness of the support, challenges associated with the programs, risk-sharing and partnerships for innovation. This book is of interest to academics, students, practitioners, policymakers, governmental and non-governmental organizations as well as other stakeholders who wants to be informed about the challenges, progress and current trend in stimulating innovation and entrepreneurship. Series Foreword 6 Preface 10 Acknowledgments 12 Contents 13 About the Editors 15 Part I: An Overview of Government Intervention to Stimulate Innovation and Entrepreneurship 18 Chapter 1: An Overview 19 1.1 Introduction 19 1.2 Part 1: An Overview of Government Intervention to Stimulate Innovation and Entrepreneurship 20 1.3 Part II: Non-tax Incentives to Stimulate Innovation and Entrepreneurship 22 1.4 Part III: Tax Incentives to Stimulate Innovation and Entrepreneurship from an International Perspective 24 References 25 Chapter 2: Tax Versus Non-tax Incentives to Stimulate Innovation and Entrepreneurship: An International Perspective 28 2.1 Introduction 29 2.2 An Overview of Innovation and Entrepreneurship 30 2.3 Review of Tax and Non-tax Incentives to Innovation and Entrepreneurship 31 2.3.1 Rationales for Incentives 31 2.3.2 Tax Incentives to Innovation and Entrepreneurship 33 2.3.2.1 Tax Incentives for Innovation 33 2.3.2.1.1 Tax Incentives for R&D 33 2.3.2.1.2 Specific Tax Rate 34 2.3.2.1.3 Patent Box 35 2.3.2.2 Tax Incentives to Entrepreneurship 37 2.3.2.2.1 Tax Incentives to Angel Investors 37 2.3.2.2.2 Tax Incentives to Venture Capital and Crowd Fund 38 2.3.3 Non-tax Incentives for Innovation and Entrepreneurship 39 2.3.3.1 Financial Assistance 39 2.3.3.2 Government Grants 40 2.3.3.3 Public Procurement 40 2.4 Research Methodology 41 2.4.1 Brief Overview of Methodology 41 2.4.2 Simplified Flowchart of the Dynamic IaE Process 41 2.5 Data Collection and Analysis 42 2.5.1 Experts Focus Group 42 2.5.2 Analysis of the Results 45 2.6 Summary and Conclusion 48 2.7 Limitation of Research 49 References 50 Chapter 3: The Role of Tax Incentives in the Promotion of Innovation and Entrepreneurship: A Time and a Place 54 3.1 Introduction 54 3.2 Context: Innovation, Entrepreneurship, and Research and Development 55 3.3 Types of Incentives/Policy Mix 57 3.4 Tax Incentives 62 3.4.1 Incentives at the Level of the Firm 62 3.4.2 Tax Incentives for Staff 67 3.4.3 Tax Incentives for Investors 67 3.5 Key Trends in Tax Incentives 68 3.6 Policy Considerations 70 3.7 Concluding Remarks 71 References 72 Chapter 4: Exploring the Relationship of Patented Innovation to Entrepreneurship in Selected Countries: Theoretical and Empirical Perspectives 76 4.1 Introduction 77 4.2 Why Innovation? 78 4.2.1 Schumpeter and Entrepreneurship 79 4.2.2 Patent Motivation and Business Startup 80 4.2.3 Organising for Innovation 82 4.2.4 Entrepreneurship, Small Firms and Innovation 83 4.2.5 R&D and Global Innovation 85 4.3 Data and Statistical Analyses 88 4.3.1 Dr. Mahadea, Darma 91 4.4 Discussion 92 4.5 Conclusion 95 Appendix – Raw Granger Causality Results 96 References 98 Part II: Non-Tax Incentives to Innovation and Entrepreneurship 102 Chapter 5: Policies and Programs to Stimulate Digital Transformation Among SMEs: Where Do We Go from Here? 103 5.1 Introduction 104 5.2 Digital Transformation Barriers 105 5.3 Policies Promoting Digital Transformation Among SMEs 105 5.4 Conclusion 114 5.5 Policy Implications 114 References 115 Chapter 6: Assessing the Impact of Major Political and Institutional Factors on New Businesses: The Case of Qatar 119 6.1 Introduction 120 6.2 Literature Review 122 6.2.1 Studies on the Impact of Political and Social Environment on Entrepreneurship 122 6.2.2 Studies on Institutional Support to Businesses and Entrepreneurship 125 6.3 Studies on Fiscal and Non-fiscal Incentives to Entrepreneurship and SMEs 127 6.4 Data Analysis and Econometric Model 128 6.4.1 Basic Summary Statistics 128 6.4.2 The Econometric Model 130 6.4.3 Empirical Results 131 6.4.3.1 The Augmented Dickey-Fuller Unit Root Test (ADF) 131 6.4.3.2 The ARDL Cointegration Approach 131 6.5 Discussion and Policy Analysis 132 6.6 Conclusion 134 References 134 Chapter 7: Government Incentives to Stimulate Innovation and Entrepreneurship in Poland 139 7.1 Introduction 139 7.2 The Development of Innovation and Entrepreneurship in Poland (2006–2020) 142 7.3 Tax and Non-tax Financial Instruments Based on Domestic Sources 151 7.3.1 Policy Tools in Force in 2008–2015 151 7.3.2 Policy Tools in Force in 2016–2020 154 7.4 Programmes and Tools Based on Financial Resources from the European Union 161 7.5 Policy Instruments for Technological Start-Ups 165 7.6 Basic Findings and Conclusions 167 References 170 Books and Articles 170 Web Pages 171 Legal Acts 172 Chapter 8: Diversification, Entrepreneurship, and Natural Resources: The Case of Qatar 173 8.1 Introduction 174 8.2 Qatar’s Economic Structure from a Transformative State Perspective 175 8.2.1 Qatar’s Productive Circuit 177 8.2.2 Financial Circuit 179 8.2.3 Commodity Circuit 180 8.3 Economic Diversification Argument for Qatar 181 8.4 Potential Invention and Incentive Capacity in Qatar 185 8.5 Conclusions, Discussions, and Remarks 192 References 194 Part III: Tax Incentives to Innovation and Entrepreneurship 198 Chapter 9: The Italian Tax Incentives to Undertakings and the European Constraints 199 9.1 Introduction: Tax Incentives in Europe and Italy 199 9.2 Making Sense of Incentives in the Constitutional Italian Framework 201 9.3 The Definition of Tax Incentive 205 9.4 The Case for a Coherent Tax Incentives Scheme: The Industry 4.0 Plan and the Three-Pillars-Based Approach 208 9.4.1 Tax Credit for Investments on Instrumental and Durable Goods 210 9.4.2 Tax Credit for R&D, Technological Innovation, Design, and Creativity 211 9.4.2.1 Compliance Duties in Connection with the Incentives 214 9.4.3 Tax Incentives for Education 4.0 216 9.4.3.1 Compliance Duties in Connection with the Incentives for Education 4.0 217 9.5 The Italian Intellectual Properties Box System and Its Consistency with the Principles of Fair Tax Competition (and State Aid Prohibition) 218 9.5.1 The State of the Art and the Current IP Box 220 9.5.2 Procedure and Compliance Duties Connected to the Incentive 221 9.6 Tax Incentives and Their Constraints: The European State Aid Doctrine and the Code of Conduct 223 9.6.1 Prohibition of State Aid in the European Union and the Limitation to Tax Incentives 225 9.6.1.1 The European Commission Control over Tax Incentives and their Compatibility with EU Law 228 9.6.1.2 Soft Law Response to Tax Incentives: The Code of Conduct 229 9.7 Concluding Remarks and Policy Recommendations 231 Chapter 10: Incentivizing Research and Development Through Entrepreneurship in New Zealand: Politics to the Fore 234 10.1 Introduction 235 10.2 Background to Fiscal Support in NZ: Research and Development and Venture Capital 237 10.2.1 The New Zealand Productivity Paradox and Entrepreneurship 237 10.2.2 Research and Development and Venture Capital: An Introduction 238 10.3 Fiscal Support for R&D in NZ: A Political “Football” 238 10.4 New Zealand’s Fledging Venture Capital Market and Limited Partnerships 240 10.4.1 Venture Capital in New Zealand: A Review 240 10.4.2 Facilitating International Investment: The Limited Partnership 244 10.5 Discussion and Analysis 245 10.6 Concluding Observations 247 References 248 Chapter 11: Government Support to Stimulate Innovation and Entrepreneurship: Evidence from Croatia 251 11.1 Introduction 252 11.2 The Importance of R&D Tax Incentives 253 11.2.1 Types of R&D 254 11.2.2 Advantages and Disadvantages of Tax Incentives for R&D 255 11.3 Innovation and R&D Investment Performance in the Republic of Croatia 257 11.3.1 The Development of R&D Tax Incentives 258 11.3.2 The Structure of R&D Investment 261 11.4 Conclusion 264 References 264 Chapter 12: Assessing the Tax Incentives for Entrepreneurship and Innovation in Qatar 267 12.1 Introduction 267 12.2 Tax Incentives to Innovation and Entrepreneurship 269 12.2.1 An Overview 269 12.2.2 Types of Tax Incentives to Innovation and Entrepreneurship 271 12.3 Tax Incentives to Innovation and Entrepreneurship in Qatar 272 12.3.1 General Incentives 272 12.3.2 Tax Incentives for Innovation and Entrepreneurship Under Specific Tax Regimes 273 12.3.2.1 Qatar Financial Centre 273 12.3.2.2 Qatar Science and Technology Park (QSTP) 274 12.3.2.3 Qatar Free Zones 275 12.3.2.4 Media City 275 12.4 Analysis and Assessment of Qatar’s Tax Incentive Framework 276 12.4.1 General Provision 276 12.5 Concluding Remarks 279 References 280 Index 282