The UK Government introduced tax credits for SMEs to promote and support R&D in 2000. Since then the policy has become more generous in this respect, particularly since 2008. In this paper we use the National Systems of Entrepreneurship (NSE) as a conceptual framework in which to question whether SMEs take-up of tax credits has actually led to an increase in product, service, or process innovations. Our evidence suggests that (a) SME engagement with the policy is fairly randomly distributed across the sector, and (b) there is little additional product-service innovation to justify the expenditure in foregone taxes given the current distribution of credits, but (c) there is evidence of enhanced radical process innovations, particularly when combined with strong capability and planning at the firm level.
Bibliographical noteThe final publication is available at Springer via http://dx.doi.org/10.1007/s11187-016-9704-2
- Tax credits
- Government policy