We examine operating and investment decisions in a duopolistic industry in which an initial investment in research yields an immediate tax benefit for one firm, but creates a net operating loss carryover for the other firm. We show that the conventional wisdom that suggests that the first firm...

Loss firms are an economically significant and growing segment of the population of publicly traded corporations. Relatively little is known about the tax positions of loss firms because they are typically dropped from tax avoidance studies. We develop a new measure of corporate cash tax...

The fact that incumbent firms can immediately deduct research and development (R&D) investments from taxable income is generally believed to give them a strategic advantage over new firms that cannot deduct the investment cost, but instead generate a net operating tax loss carryover. Using an...