5th Edition - 2026/27

☘️Session 1  (1 October 2026)

"Tax Incentives For Innovation: The Differential Impact Across Innovation Types"

Maria Sofia Liberati (University College Dublin) 

Abstract: This paper studies the effects of tax incentives on firms’ choices between different types of innovation. We explore how the introduction of front-end (e.g., R&D tax credits) and back-end (e.g., patent boxes) tax incentives alter a firm’s optimal choice across product, process, or mixed innovation using a simple theoretical framework. We then provide empirical evidence on the heterogeneous effects of these tax instruments across innovation types using European Patent Office (EPO) data. Our empirical results suggest that the introduction of patent box regimes leads to an increase in process inventions disclosed in patents and, overall, to a higher number of mixed patent applications, at the expense of pure product patents. These findings help explain the growing prevalence of mixed patents observed over time and highlight that fiscal incentives can unintentionally distort firms’ innovation portfolios– encouraging certain innovation types while may induce underinvestment in others.