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Abstract

Over the period 1994-1999, for a sample of 57 firms, in-process research and development (IPRD) costs write-offs were reported in the 10-Ks of approximately 12% of the observations. The IPRD amounts ranged from $230,000 to over $16 7 million. In 38% of these cases, Compustat overstated R&D expense by including the IPRD write-off Comparative econometric estimates obtained show larger parameter coefficients when the Compustat's R&D expense data was used. This suggests prior research on R&D tax credit effectiveness based on Compustat data may have been upwardly biased, overstating the tax credit's incentive effects. Policy implications and directions for future research are discussed.

Volume

2

Issue

1

First Page

158

Last Page

169

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