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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/46562
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| Title: | | Entrepreneurial innovations and taxation  |
| Authors: | | Haufler, Andreas Norbäck, Pehr-Johan Persson, Lars |
| Issue Date: | | 2011 |
| Series/Report no.: | | CESifo working paper: Public Finance 3473 |
| Abstract: | | In many countries entrepreneurship is promoted through tax reductions for small businesses and by various government support schemes. We analyze the effects of such policies to subsidize small businesses in a setting where both the risk-return characteristics of the selected innovation project and the mode of commercialization chosen by entrepreneurs (market entry versus sale to an incumbent firm) are endogenous. We show that government programs to support small businesses foster market entry by entrepreneurs but, at the same time, give an incentive to choose low risk projects, due to the existence of limited loss offset provisions. This points to a basic trade-off between the goals of raising competition in technology-intensive markets and the desire of governments to foster risky 'breakthrough' innovations. |
| Subjects: | | business taxation innovation market entry |
| JEL: | | H25 L13 M13 O31 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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