This project investigates the impact of taxation on corporate innovation in the context of the knowledge economy. The focus is placed on the influence of tax considerations on firms’ decisions about where to locate R&D activity. The analysis will investigate in detail whether the taxation of assets and/or functions upon their cross-border transfer exerts an effect on the decision about where to engage in R&D activity. Moreover, the role of the taxation of highly skilled R&D staff will be assessed for the first time. A third module of the research project deals with the measurement of effective tax rates on the production and exploitation of intellectual property. The effects of fiscal incentive schemes on R&D activity and the induced effects on aggregate tax revenue will be the subject of another research module within the scope of the project. The work-packages combine theoretical and micro-econometric approaches which take into account the characteristics of tax systems.