We study whether innovation box tax incentives, which reduce tax rates on innovation-related income, are associated with tax-motivated income shifting, investment, and employment in the countries that implement these regimes. Using a matched sample of European multinationals’ subsidiaries operating in Europe, we find evidence consistent with firms engaging in less tax-motivated income shifting out of the country following the implementation of innovation box regimes that provide the greatest tax benefits. We also find that innovation boxes are associated with higher levels of fixed asset investment and employment relative to control observations. Our study contributes to the literature and policy debate on innovation box tax incentives by demonstrating their effectiveness in altering the location of firms’ reported income and by examining the extent to which the incentives also result in real investment and employment effects.