Nottingham Centre for Research on
Globalisation and Economic Policy (GEP)

GEP 2020/06: Capital incentives in the age of intangibles

Abstract

Cloud computing presents a significant change in the way firms access digital technology and enables data-driven business models. Now, firms can acquire their storage, processing and software needs as a cloud computing service rather than making upfront fixed cost investments in capital. Yet, policies that encourage digital diffusion are still targeted towards investment in physical IT capital. This paper exploits a UK tax incentive for capital investment to examine firm adoption of cloud computing and big data analytics. Using a quasi-natural experimental approach our empirical results show that the policy increased investment in IT capital and hardware as one would expect; but it reduced the adoption of cloud and big data analytics. The adverse effects of the policy on cloud and big data adoption are particularly pronounced for small firms.

Download the paper in PDF format

Authors

Timothy DeStefano, Nick Johnstone, Richard Kneller and Jonathan Timmis

 

 

View all GEP discussion papers | View all School of Economics featured discussion papers

 

Posted on Friday 24th July 2020

Nottingham Centre for Research on Globalisation and Economic Policy

Sir Clive Granger Building
University of Nottingham
University Park
Nottingham, NG7 2RD

Enquiries: hilary.hughes@nottingham.ac.uk