Institutional Environment,Size Of Enterprise And Pretax Additional Deduction Policy For The Enterprises’ R&D Expenses

R&D activity is not only the foundation of innovation ability in the enterprise, but also the core of achieving sustainable development in the current national innovation strategy. However, innovative activities have positive externalities, high risk and uncertainty, which is difficult to be compensated through the market mechanism, fully relying on market mechanism supplying R&D activities is often prone to market failure, so we need the R&D tax preferential plicies such as government intervention to reduce the costs of R&D, increase the R&D investment and stimulate the innovation activities of the enterprise. Pretax Additional Deduction(PAD)policy for the enterprises’ R&D expenses as a general policy, the status of the R&D activities of the enterprise is becoming more and more important, its effectiveness of the policy and the mechanism of the policy will provide practical reference for the government to improve the PAD policy.First of all, I briefly introduce the present situation of the PAD policy in China. And I compare the policy in other countries combining with the research result with the Guangdong’s PAD policy. Secondly, on the basis of literature around the world, the effectiveness of the PAD policy in 2008 and 2013 is discussed. Then I study the incentive of the enterprise scale. Finally, I study the different system environment, the size of enterprise on its incentive effect.This paper uses relevant data from year 2007 to year 2012 and year 2012 to year 2014 in China’s A-Share Market, through methods such as descriptive statistics and double difference model respectively in 2008 and 2013 testing the implementation of the PAD policy. Empirical study results show that after the PAD policy:(1)Enjoying the 2008 policy can significantly increases the R&D input and innovation output, while enjoying the 2013 policy is not able to increase the R&D input and output significantly.(2) The PAD policy on the incentive effect of R&D activities has certain time lag.(3) The size of the enterprise is positive related to the effectiveness of the PAD policy.(4) The institutional environment is positive related to the effectiveness of the PAD policy.(5) The institutional environment can adjust the enterprise size and the PAD policy’s effect.