The R&D tax credit policy is designed to allow firms to deduct a portion of their research expenditures from income tax or carry them forward to subsequent years. Under the “Law on Knowledge-Based Production Leap,” this instrument aims to stimulate business investment in R&D; however, the actual uptake has fallen significantly short of projected targets. Consequently, this study aims to diagnose the implementation challenges of this policy in Iran. The central research question addresses why the policy’s full potential remains unrealized. Employing an exploratory qualitative approach and a case study methodology, data were collected through 23 semi-structured interviews with key stakeholders—policymakers, R&D assessment experts, and managers of eligible firms—and analyzed using content analysis in MAXQDA.
The findings reveal five primary clusters of challenges: flaws in policy design and inclusiveness; institutional fragmentation and a lack of mutual trust among stakeholders; the complexity, ambiguity, and instability of the implementation process and its supporting electronic system; limited policy, analytical, and executive capacity of the governing bodies; and the heterogeneity of firms and R&D activities, which has led to unequal access for small and start-up enterprises. These findings exemplify a “design-reality gap,” demonstrating that in the absence of institutional trust, effective inter-sectoral coordination, and targeted investment in implementation capacity, even well-designed policy instruments will fail to significantly increase business R&D investment.