The Impact of Government Interventions on the Performance of Biotechnology, Information and Communications Technology, and Electrical and Electronics Firms: Evidence from Iran

Governments can implement monetary and fiscal policies to facilitate the formation and growth of firms, such as tax incentives and direct funding. In developing countries, these incentives are for various purposes like to regulate the allocation of resources, support private sector investments through incentives, palliate inequality between income and wealth, control inflation, and create resources for the public sector. In Iran, the law for supporting knowledge-based firms (KBFs) considers policy incentives (e.g., a 15-year sales tax exemption and low-interest financing for technology development and commercialization) for high-tech firms. In this paper, the direct and interaction impact of both incentives on small firms in Iran has been analyzed by employing the factorial design approach. We compare the use of both incentives in three sectors including biotechnology (BIO), information and communications technology (ICT), and electrical and electronics (ELECT). Test results show the differential effects of incentives in each sector. Therefore, designing policy instruments for Iranian firms requires that these instruments be considered according to the terms and characteristics of firms in each field.