R&D tax credits, by stimulating private sector innovation, can play a key role in promoting
employment and firm performance. This paper examines the program impact on the trajectory
of firms in terms of technology adoption, firm performance and workforce composition, and
the extent to which it depends on the size of the targeted firms. It uses rich longitudinal microdata
on innovation, firms and their workers. Combining matching with a staggered adoption
differences-in-differences, we show that tax credits increase investment in R&D-related
activities while funds are being received, but not thereafter. Productivity and efficiency (but
not employment) increase in large firms. These effects are driven by structural changes, both
in terms of the increased share of skilled individuals within the firm (keeping the overall
employment level constant) and enhanced technological adoption.
