Working Paper: NBER ID: w31452
Authors: Rishi Sharma; Joel Slemrod; Michael Stimmelmayr
Abstract: We develop a positive model of multinational firm behavior and analyze a firm’s incentive to transfer an intellectual property (IP) right of uncertain value offshore ex ante, i.e. before its success or failure is realized. Our analysis highlights two major aspects of this decision. First, an asymmetric treatment of project gains and losses in the home country creates an incentive to transfer IP to a foreign lowtax country to avoid potentially negative profits at home. These incentives exist even when IP is priced at a fair arms-length price and are further strengthened in the presence of R&D tax incentives. Second, when multinationals have private information about the probability of project success, they have an incentive to transfer their most promising IP ex ante.
Keywords: No keywords provided
JEL Codes: H25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| asymmetric treatment of losses (G32) | decision to transfer IP (O34) |
| presence of R&D tax incentives (O39) | likelihood of transferring IP (O34) |
| private information about project success probabilities (H43) | decision to transfer IP (O34) |
| project success probabilities (O22) | decision to transfer IP (O34) |