The Effect of Innovation Box Regimes on Investment and Employment Activity

Shannon Chen, Lisa De Simone, Michelle Hanlon, Rebecca Lester

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


We study whether innovation box tax incentives, which reduce tax rates on innovation-related income, are associated with increased fixed asset investment and employment. Using a stacked cohort difference-indifferences design on an entropy-balanced sample of European multinationals, we find innovation box regimes are associated with higher levels of capital expenditures, relative to noninnovation box jurisdictions. We do not find discernible effects on total employment or total compensation. However, the data suggest that companies in innovation box countries have a more highly compensated workforce following innovation box implementation, particularly among patent-owning observations in countries with more restrictive innovation box regimes and greater tax benefits. Our study contributes to the literature on, and policy evaluation of, innovation box regimes by examining the extent to which these incentives result in tangible investment and employment and by identifying how different characteristics of innovation box regimes impact these outcomes.

Original languageEnglish (US)
Pages (from-to)187-214
Number of pages28
JournalAccounting Review
Issue number5
StatePublished - Sep 2023


  • employment
  • innovation box
  • investment

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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