State Research and Development Tax Credits: The Historical Emergence of a Distinctive Economic Policy Instrument

By 2010, all but 12 U. S. states had adopted some form of research and development tax credits. The forces driving the rapid rise and spread of this policy remain unclear. This event history analysis finds adoption to be associated with higher state unemployment levels, supporting the notion of "policy-making from disadvantage." Yet higher patenting activity is also associated with adoption, suggesting that having a strong preexisting research and development (R&D) infrastructure facilitates adoption. In the 1980s, having a Republican governor apparently propelled adoption, but partisan influences disappeared in later years. Having a governorship with constitutionally strong budgetary power and having a centralized governing board for higher education are associated with adoption, and interaction analyses indicate that the combination of a centralized board and a higher number of research universities are especially positive forces in adoption. The socioeconomic, political, and structural influences found in this article suggest several potentially fruitful directions for future analyses.