Handbook of Innovation Policy Impact

Handbook of Innovation Policy Impact

Eu-SPRI Forum on Science, Technology and Innovation Policy series

Edited by Jakob Edler, Paul Cunningham, Abdullah Gök and Philip Shapira

Innovation underpins competitiveness, is crucial to addressing societal challenges, and its support has become a major public policy goal. But what really works in innovation policy, and why? This Handbook, compiled by leading experts in the field, is the first comprehensive guide to understanding the logic and effects of innovation polices. The Handbook develops a conceptualisation and typology of innovation policies, presents meta-evaluations for 16 key innovation policy instruments and analyses evidence on policy-mix. For each policy instrument, underlying rationales and examples are presented, along with a critical analysis of the available impact evidence. Providing access to primary sources of impact analysis, the book offers an insightful assessment of innovation policy practice and its evaluation.

Chapter 2: The impact of fiscal incentives for R & D

Philippe Larédo, Christian Köhler and Christian Rammer

Subjects: business and management, organisational innovation, economics and finance, economics of innovation, innovation and technology, economics of innovation, innovation policy, organisational innovation


R & D tax incentives are a policy tool to support business R & D. Their main rationale is to compensate for limited appropriability of private R & D due to knowledge spillovers. By granting a tax reduction depending on either the volume of or increase in a firm’s R & D expenditure, governments co-finance private R & D. The key direct objective of R & D tax incentives is to raise business R & D expenditure, and most evaluations undertaken have analysed the effectiveness of this instrument based on input additionality. In recent years, fiscal incentives have also been used to target other policy objectives, including the support of small and young firms, strengthening of industry–science linkages and promoting R & D in certain thematic areas. Furthermore there has been more and more attention by governments on broader impacts: the competitiveness of their industry and the international attractiveness of their country as a location for innovation. However, very few evaluations have addressed these issues, and little is yet known about the long-term welfare effects.

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