СТИМУЛЮВАННЯ ІННОВАЦІЙНОГО ЕКОНОМІЧНОГО ЗРОСТАННЯ В УМОВАХ ЦИФРОВІЗАЦІЇ СВІТОВОГО РИНКУ: ТЕОРЕТИЧНІ ЗАСАДИ ТА МІЖНАРОДНИЙ ДОСВІД (С. 130-137)

УДК 303.3

STIMULATING INNOVATIVE ECONOMIC GROWTH IN THE CONTEXT OF DIGITALIZATION OF THE GLOBAL MARKET: THEORETICAL FOUNDATIONS AND INTERNATIONAL EXPERIENCE

https://doi.org/10.36994/2707-4110-2026-18-45-10

Nagolyuk Olenа

PhD in Law, Associate Professor

Head of the Department of Finance and Accounting

Open International University

development of the people “Ukraine”

ORCID: https://orcid.org/0000-0002-7610-7379

Vasyurenko Larysa

Candidate of Economic Sciences, Associate Professor,

Head of the Department of the Department of Economics and Law

Kharkiv University of Humanities “People’s Ukrainian Academy”

ORCID ID: 0000-0002-7314-6890

Spivak Sophiya

Candidate of Economic Sciences, Associate Professor,
Private high-resolution deposit "University of Medicine and Social Sciences"ORCID ID: 0000-0001-8339-1876[1]

Abstract. The article is devoted to a comprehensive analysis of the role of tax instruments in stimulating innovative economic growth in the context of global digital transformation, which significantly changes the principles of functioning of national economies and the world market as a whole. The purpose of the study is to identify and thoroughly analyze the impact of fiscal instruments on economic growth based on innovations, digital technologies and the development of the knowledge economy. Particular attention is paid to revealing the essence of innovative economic growth in the modern digital era, determining its key characteristics, factors of formation and the role of state policy in supporting the innovative activity of business entities. Tax incentive instruments are systematized and classified, which include direct (tax benefits, loans, investment deductions), indirect (accelerated depreciation, tax rebates) and mixed mechanisms that combine elements of different approaches. Their effectiveness in the context of stimulating research and development, the development of startups and the implementation of digital innovations is studied. Separately, the article analyzes the contradictory impact of digitalization, which, on the one hand, contributes to increasing transparency, efficiency and automation of tax administration, and on the other hand, creates new challenges for fiscal systems, in particular related to the taxation of transnational digital corporations, the erosion of the tax base and the need for international coordination of tax policy. National models of tax incentives are examined in detail using the example of the USA and China, their key instruments, institutional features and approaches to supporting innovative development are identified. The comparative analysis made it possible to identify both common trends and differences in the formation of tax policy in the digital economy. As a result, it is substantiated that the development of an adapted, flexible and strategically balanced state tax policy is a critically important factor in ensuring sustainable innovative development, increasing the competitiveness of the national economy and effective integration into the global digital space.

Keywords: tax incentives, innovations, market economy, management, world market

1. Introduction

Innovative economic growth is a priority strategic goal for modern economies, since it is it that ensures qualitative transformations in the structure of production and an increase in the standard of living of the population. In this context, state policy, in particular tax policy, plays the role of a critically important tool capable of creating favorable conditions for scientific and technological progress and the introduction of innovations. The relevance of this issue is significantly enhanced in the conditions of the Fourth Industrial Revolution, which transforms traditional economic models and requires new approaches to regulation. This article is devoted to the analysis of the theoretical foundations of tax incentives, the study of its specifics in the digital era, and the study of the practical experience of leading world economies.

3. Relevance of the topic

At the current stage of the development of the world economy, the driving force of growth is scientific and technological progress, based on the informatization and intellectualization of production. The transformative impact of the Fourth Industrial Revolution and total digitalization on economic processes makes the study of tax policy instruments extremely important. Ensuring sustainable economic growth on an innovative and digital basis is a fundamental problem for many countries. In this regard, the analysis of international experience, in particular the leading economies of the world, such as the USA and China, is of high practical value. The study of their approaches to tax stimulation of innovative activity allows us to formulate effective national strategies for overcoming economic crises and ensuring long-term development.

4. Purpose of the article

The main goal of the article is to identify and analyze the impact of tax incentives on innovative economic growth in the context of digitalization of the national economy.

5. Review of sources by topic

The theoretical and methodological basis of this study is the works of leading domestic and foreign scientists [1-11]. Fundamental approaches to the theory of economic growth are laid in the works of such Western economists as J. Schumpeter, who introduced the concept of "creative destruction"; researcher, who explained the role of technological progress as an exogenous factor; P. Romer, who substantiated endogenous growth through the accumulation of knowledge [5]; F. Aghion and P. Howitt, who developed a modern model of creative destruction [4]. The issues of tax incentives are deeply analyzed in the works of J. Stiglitz, who studied market failures and the role of state intervention, in particular through tax policy [3]. This article is based on this extensive academic work to analyze modern challenges and opportunities of tax policy.

6. The main part

6.1. The essence and models of innovative economic growth

For effective analysis of public policy instruments, it is strategically important to understand the theoretical foundations of the phenomenon on which its influence is directed. Innovative economic growth is fundamentally different from extensive growth, which occurs due to a quantitative increase in the factors of production. Instead, innovative growth is based on the qualitative improvement of technologies, increased productivity and intensification of resource use. This concept is closely related to the idea of "creative destruction" by J. Schumpeter , according to which innovations create new technologies that displace outdated ones, thereby changing the structure of the economy and stimulating its development. The evolution of theoretical models reflects a deepening understanding of the role of technological progress. R. Solow's model considered it as an external (exogenous) factor, which is the main source of long-term growth. In contrast, endogenous growth models consider technological progress as an internal result of economic activity. In particular, models achieve constant marginal productivity of capital by considering “capital” in a broad sense, including both physical and human capital . P. Romer’s model shows how knowledge accumulation is transformed into GDP growth, and the Aghion-Howitt model reveals in detail the Schumpeterian approach, where innovators receive a temporary monopoly profit, which stimulates a further innovation cycle. These theoretical foundations are the foundation for understanding the specifics of economic growth in the modern era, where digital technologies are the driving force.

6.2. Specificity of innovative growth in the digital economy

The Fourth Industrial Revolution, based on the synthesis of physical, digital and biological technologies, is fundamentally changing economic paradigms. Digitalization is transforming traditional factors of production, turning “big data” into one of the key resources alongside labor and capital. This necessitates a rethinking of classic growth models and the adaptation of policies to new realities.

Based on the analysis of these processes, the following definition can be formulated: innovative economic growth in the digital economy is an increase in potential output based on the introduction of digital innovations into all spheres of society, which is based on the development of the material and technical core of the digital economy (microelectronics, digital infrastructure), as well as nano- and biotechnology.

At the same time, the consequences of this process are contradictory. Despite the exponential growth of technological progress, many countries are experiencing a slowdown in productivity growth, known as the “productivity paradox” . This trend is confirmed by the dynamics of total factor productivity (TFP) in developed countries, the average annual growth rate of which slowed from 2.5% in the period 1950–1980 to only 0.6% in 2000–2018 . This indicates that innovative growth is not automatically sustainable. The development of basic digital infrastructure requires significant long-term investments, which are not always covered by revenues from digital services. This creates an objective need for active state support to stimulate innovative and digital business, in particular through tax policy instruments.

6.3. Tax incentive instruments and the impact of digitalization on them

Tax policy is one of the most powerful instruments of indirect state influence on the economy. By providing benefits and preferences, the state can reduce business costs for innovative activities, encouraging investment in R&D, modernization of production and introduction of new technologies. Tax incentive instruments can be classified into three main groups:

• Direct instruments: Involve manipulation of the basic elements of the tax.
  • Tax rate: Establishing reduced income tax rates for innovative enterprises or for income from innovative activities.
  • Tax base: Possibility of reducing the tax base by the amount of expenses related to innovations.
• Indirect instruments: Provide benefits in the form of deductions or exemptions.
  • Tax credits: A direct reduction in the amount of tax liability for a certain portion of investment or innovation costs. In international practice, unlike in some post-Soviet contexts, the term "credit" refers to a tax reduction, not a loan that must be repaid.
  • Tax Exemptions: Exemption from taxation of certain objects or activities.
  • Tax exemptions: Full or partial exemption of certain categories of taxpayers from paying tax.
  • Tax deductions: Deduction from the tax base of certain types of expenses (e.g., for charity, education, scientific research).
  • Tax holidays: Temporary tax exemptions for start-ups or innovative businesses.
• Mixed instruments: Combine tax incentives with a territorial or sectoral approach.
  • Organization of free economic zones (FEZ): Creation of territories with a special legal and tax regime to attract high-tech companies. This tool is considered one of the most effective.

Digitalization has a contradictory, dual impact on the tax regulation system, creating both new opportunities and serious challenges (tab 1).

Table 1

Examining the practical application of these tools in the world's leading economies allows us to better understand their effectiveness and limitations.

6.4. Analysis of international experience: USA and China

A comparative analysis of US and Chinese tax policies is particularly valuable because these countries represent two different but highly influential models for stimulating innovative growth. The US emphasizes market mechanisms and broad tax incentives, while China combines fiscal instruments with state planning and industrial policy.

An infographic representation of US and Chinese tax policies was created using digital artificial intelligence resources (Fig.1):

Fig.1. Representation of US and Chinese tax policies [12]

The US tax system has traditionally used two key tools to encourage innovation:

1. Special depreciation regimes: Allow companies to write off the cost of high-tech equipment more quickly, reducing the tax base and freeing up funds for reinvestment.
2. R&D tax credits: This is one of the most important incentives. Its mechanism allows companies to deduct from their tax liability up to 20% of qualified R&D expenses that exceed the base amount calculated for previous periods. There is also an alternative simplified credit of 14% of the amount of research expenses.

An important milestone was the 2017 tax reform, known as the Tax Cuts and Jobs Act . Its key element was a radical reduction in the corporate tax rate from 35% to 21%. The goal of the reform was to increase the international competitiveness of American businesses, stimulate domestic investment, and return manufacturing capacity to the United States.

China's approach is more targeted and combines fiscal instruments with active industrial policies. The main tax incentive tools include:

1. R&D tax preferences: Allow companies to super-deduct R&D expenses from their tax base, significantly reducing the effective tax rate.
2. Accelerated depreciation: Aimed at stimulating equipment renewal in high-tech industries.
3. Tax holidays: Providing temporary tax exemptions for newly created innovative companies.

A key role in the Chinese model is played by technology parks and free economic zones , such as the famous Zhongguancun Technology Park in Beijing (the “Chinese Silicon Valley”). Residents of such zones receive significant tax breaks, administrative support, and access to infrastructure. The effectiveness of such a policy is confirmed by impressive statistics: the number of patent applications filed by Chinese residents increased from 4,065 in 1985 to 1,393,815 in 2022 .

Thus, an analysis of the two leading economies reveals fundamental differences in approaches. The US model relies on broad, market-oriented incentives, such as a general corporate tax rate cut and tax credits, that create a general favorable environment for business but do not single out specific priorities. In contrast, the Chinese model is targeted and state-led, integrating tax policy (e.g., super-taxation) with industrial strategy through special zones and technology parks to achieve specific technological goals.

7. Conclusions

Based on the analysis, a number of key conclusions can be formulated regarding the role and mechanisms of tax incentives for innovative economic growth.

1. Innovative economic growth in the digital economy is a qualitative process that relies on the introduction of digital technologies and the development of high-tech infrastructure. Its unstable nature and the presence of a “productivity paradox” highlight the critical dependence on targeted state support, where tax mechanisms play a key role.
2. Tax incentive instruments are classified as direct (rate, base), indirect (credits, deductions, holidays) and mixed. Practice shows that the highest efficiency is demonstrated by mixed instruments, such as free economic zones (FEZ), which combine tax breaks with infrastructure development and the creation of a favorable business environment.
3. Digitalization has a dual impact on fiscal policy. On the one hand, it improves tax administration, increases its transparency and efficiency. On the other hand, it creates new systemic challenges related to the taxation of cross-border e-commerce and the complication of the fight against tax evasion in the global digital space.
4. International experience shows a variety of approaches to tax incentives. The United States emphasizes broad instruments such as R&D tax credits and general corporate rate reductions, relying on market mechanisms. In contrast, China employs a more targeted policy that integrates tax incentives with state planning, industrial zones, and technology parks to achieve strategic goals.
5. Developing an effective national innovation strategy for the 21st century requires flexibility and adaptability. The optimal approach is likely not to blindly copy one model (the US or China), but to create a hybrid system that combines broad market incentives with targeted support for strategically important sectors and infrastructure, taking into account the specific national context and the global challenges of digitalization.

References:

1. Mitchell J., Testa G., Sanchez Martinez M., Cunningham PN and Szkuta K. Tax incentives for R&D: supporting innovative scale-ups? - Research Evaluation, 29(2). - 2020. - p. 121-134.
2. Atanassov J. and Liu X. Can corporate income tax cuts stimulate innovation? - Journal of financial and quantitative analysis. - Vol. 55, no. 5, Aug. 2020. - pp. 1415-1465.
3. Guzman, M., & Stiglitz, J. E. (2024). Post-neoliberal globalization: international trade rules for global prosperity. Oxford Review of Economic Policy, 40(2), 282-306.
4. Aghion, P., & Howitt, P. (2023). The creative destruction approach to growth economics. European Review, 31(4), 312-325.
5. Römer, P., Heimes, D., Pabst, A., Becker, P., Thiem, D. G., & Kämmerer, P. W. (2022). Bleeding disorders in implant dentistry: a narrative review and a treatment guide. International Journal of Implant Dentistry, 8(1), 20.
6. Baumol W. The Free-Market Innovation Machine: Analyzing the Growth Miracle of Capitalism. Princeton, Princeton University Press, 2022. 318 p.
7. Geroski P. A. Innovation, Technological Change, and Economic Growth. Oxford, Oxford University Press, 2021. 400 p.
8. Krysovatyy, I., Rozumnyi, O., Ivashkiv, Y., Aliiev, E., & Furyk, Y. (2024). Innovation park and its role in stimulating economic growth. African Journal of Applied Research, 10(1), 442-453.
9. BİBER, A. E. (2024). The role of foreign direct investment in shaping the digital economy: opportunities, challenges, and global implications. PROF. DR. GÜLSÜN İŞSEVEROĞLU ASSOC. PROF. DR. SALIH BATAL, 63.
10. Aleksandrova, A., Truntsevsky, Y., & Polutova, M. (2022). Digitalization and its impact on economic growth. Brazilian Journal of Political Economy, 42(2), 424-441.
11. Wen, H., Chen, W., & Zhou, F. (2023). Does digital service trade boost technological innovation?: International evidence. Socio-Economic Planning Sciences, 88, 101647.
12. Google. (2024). NotebookLM. https://notebooklm.google.com/
13. Cai, Y., Umair, M., Adam, N. A., Zhang, R., Mirzaliev, S., & Chang, C. (2025). Marketization as a catalyst: understanding the impact of digital economies on green innovation in mainland China. Managerial and Decision Economics, 46(5), 2895-2910.

Надійшла до редакції: 22.02.2026 р.