American innovation is at a crossroads🚦

The recent halt of a key tax incentive has sent ripples through the industry.

But what does this mean for you and your company's future? I've talked about this before, but now the data is starting to come in, and it doesn't look good:

“You would normally expect the U.S. to enact policies designed to increase investment in research and innovation,” Lester says. “In this case, we saw an 11% drop in R&D investment among the most research-intensive firms.” To further compensate for the increased tax costs, some firms also reduced capital expenditures and share repurchases.

-Stanford Business

Let's break it down:

🔍 The incentive in question has played a crucial role in fueling R&D investments for years by allowing companies to expense 100% of their R&D costs in the current reporting year. But a change included in the 2017 Tax Cuts and Jobs Act forces businesses to amortize those costs over five years. This took effect in 2022 so we're just starting to see the impact.

BTW - this was done to make the numbers work so the bill would pass. They were supposed to "fix this later".

❓ Without this incentive, companies will hesitate to invest in new technologies. This isn't just a policy change; it’s a wakeup call.

Here's how you can turn this challenge into an opportunity:

👓Assess Your Current Investments.

• Look at where your R&D dollars are going.

• Prioritize High-Impact Projects.

• Shift focus to initiatives that promise the best ROI.

🤝 Collaborate with External Partners.

• Engage with consultants and experts to drive innovation.

💡 Explore Alternative Funding.

• Consider new financial strategies or partnerships.

• Look into reducing costs elsewhere.

👟 Stay Agile - adapt quickly to maintain a competitive edge.

Navigating this change requires foresight and action. As senior business leaders, it's time to reassess and realign your strategies. What steps will you take to ensure your company's innovation engine keeps running? Let us know down below or on LinkedIn.