Evaluation of the French Innovation Tax Credit

The Innovation Tax Credit (CII) is an extension of the Research Tax Credit (CIR) intended to promote the incentive effect of the CIR among SMEs, so that they commit themselves in particular to the creation of new products via the development of prototypes. Established in 2013, it represented 120 M€ in tax receivables in 2014, for almost 5,300 beneficiaries. We carry out the first impact assessment of the introduction of this public policy, over the 2013-2016 period. Using a differences-in-differences method after propensity score matching, we show a larger increase in employment in the short-term for beneficiaries, as well as a larger mid-term increase in turnover. We also observe a positive correlation between benefiting from CII and the number of products manufactured. An instrumental variable strategy, exploiting the fact that the use of a consulting firm for CIR expenditures encourages firms to claim for CII, corroborates the effects on employment and turnover, but not on new products and other variables of economic development. Finally, the introduction of CII went along with a decrease in R&D expenditures claimed for CIR.