In early 2026, Micron Technology broke ground in Clay, New York, on what is going to be among the largest semiconductor manufacturing sites in the U.S. Micron expects to invest more than $250 billion in manufacturing at this location over the next decade. As part of the deal, the state of New York provided up to $5.5 billion in state tax credits. This subsidy is one of the largest economic development grants ever awarded to a single corporation.

Despite its magnitude, what New York provided Micron is not an isolated event. The state of Indiana provided Amazon with over $8.2 billion in tax breaks, according to Business Modern Analyst . Meanwhile, Construction Owners reports that the state of Georgia’s data center sales-tax exemption now costs the state $2.5 billion in 2026 alone due to the numerous companies taking advantage of these tax incentives.

These “Megadeals”, which are subsidy packages worth over $100 million, are typically negotiated between a state or municipality and a single company to help lure economic development via a factory, headquarters, or data center to locate in their jurisdiction. While these incentives have been heralded by many as a means to boost development, others have suggested that they are being used by corporations to shop for the best deal in what ultimately amounts to a race to the bottom.

According to the Center on Budget and Policy Priorities , lawmakers have attempted to rein in these activities by introducing more than 300 bills across 41 states in 2026 alone. The reason often given is that this use of public money to boost the profits of already promising corporations in exchange for jobs and investment has not necessarily materialized.

However, a recently published academic study suggests that there are other benefits that are not being considered. In particular, the study asks the question of whether the subsidies have the unintended consequence of making local businesses around them more innovative.

Megadeal Subsidies, Local Spillovers, And Corporate Innovation

The study, “'Megadeal' Subsidies, Local Spillovers, and Corporate Innovation," is forthcoming in the Journal of Accounting Research . This study is co-authored work by Yoojin Lee of California State University, Long Beach, Shaphan Ng of Singapore Management University, and Aruhn Venkat of the University of California - Riverside. Their research question is, according to Lee, whether "large state and local tax subsidies (Megadeals) increase the innovation of local firms in the county receiving the subsidies?"

The motivation goes back to assessing the costs and benefits of these Megadeal subsidies. "Large state and local tax subsidies are controversial," explains Venkat. "They've received lots of attention in the media and news, such as Amazon's HQ2 auction, Tesla's Gigafactory in Nevada, among others. The academic evidence on these subsidies has mostly studied tangible outcomes like employment and generally at the county level. We thought it would be interesting to study whether intangible outcomes like innovation are affected and to focus on the local firm level."

To test their research question, the authors built a dataset examining Megadeals (defined as those with subsidy awards of $100 million or more) from Good Jobs First and the authors’ own searches with patent filings from other, unrelated firms located in the same county as a subsidy recipient. The sample covers 183,574 cohort-firm-county-year observations tied to 115 Megadeals between 1990 and 2014. Rather than looking only at whether the subsidized company itself patents more, the design isolates whether other local firms that do not receive the subsidy change their innovative behavior once a Megadeal lands nearby, compared with firms in neighboring counties that never received one.

The results suggest that local firms (that are unaffected by the Megadeal) in a county that lands a Megadeal go on to patent more than neighboring firms, suggesting an increase in innovation activity for these unaffected firms. The authors attribute the effect to knowledge spillovers. The idea that knowledge generated inside a large subsidized investment does not stay contained to that one company suggests a form of knowledge diffusion outward to the businesses around it.

The authors do not rely on the patent counts alone to make that case. Citations from local firms’ patents rise after a deal is awarded. Additionally, the technological similarity between local firms' patents and the subsidized firm's patents increases, and scientists and engineers who once worked at the subsidized firm move to other local employers. This result supports a direct, human channel for knowledge to move from one company to another.

However, not every type of Megadeal produces this effect. The spillovers are concentrated in subsidies for laboratories, corporate headquarters, and high-tech manufacturing plants, not unlike Micron. Meanwhile, subsidies for conventional, non-high-tech manufacturing plants show a much smaller (or no) innovation spillover effect.

That finding goes against what the researchers expected at the onset of the project. "We found the main result very surprising," said Lee. "We expected the opposite result. That is, we expected subsidy firms to crowd out local firm innovation. Subsidy firms are large and likely have a higher willingness to pay for scientists or other inputs into the research process compared to local firms. That would raise costs and limit the supply of innovation inputs to local firms. Thus, we expected lower innovation in the county receiving the subsidy."

In economic terms, the effect is large. A one-standard-deviation increase in a Megadeal's subsidy amount is associated with approximately a 3.3% to 4.9% increase in local firms' patenting. The authors note that the estimate is conservative and could be as high as 11%. The aggregated effect translates to about two to three additional local patents per year in the five years following a subsidy, rising to six to nine additional patents annually in the counties with the densest concentrations of firms.

What Megadeals Could Mean For Policymakers?

The findings do not suggest that corporate subsidies are clearly a win in all circumstances. Instead, their findings are one piece of a much larger equation that can be used to assess the overall welfare of corporate subsidies. Other research has found that Megadeals often fail to move the needle on local employment, and that the opacity of how these deals get negotiated may itself affect whether they work as intended.

"It is important to consider the effects of these subsidies holistically," states Ng. "Those are very important considerations. We expect regulators to consider the evidence in total when considering whether to award such subsidies."

The authors argue that intangible benefits, such as innovation, have been largely missing from that equation. "We've actually had the good fortune of discussing our results with policymakers and regulators involved with some of these deals," states Ng. "They seemed interested in our results and, frankly, unsurprised. Many of these subsidies are awarded with an eye towards innovation. Obviously, they primarily focus on employment or job creation, but regulators told us that innovation was also an important consideration."

What the study does not settle is whether the innovation gains are worth what taxpayers put in. "What we still don't know is the net cost-benefit of these Megadeals," Venkat notes. "We show an intangible benefit: local innovation via knowledge spillovers. However, prior work finds little employment growth, and the fiscal costs are large. The next study needs to put these pieces together: do the innovation gains translate into productivity, wages, or long-run local growth, and do those benefits outweigh the tax dollars spent?"

These findings contribute to the unresolved question and are worth keeping in mind as more Megadeals are announced and completed. Indiana’s $8.2 billion commitment to Amazon, New York's multibillion-dollar subsidy to Micron, and the next headline-grabbing investment will all eventually generate their own answer to it. For now, this study offers evidence that these enormous, controversial checks are buying more than just construction jobs, as they may be quietly making the businesses next door better at their jobs.