In concurrence with the recent credit crisis, the Italian government tried to stimulate R&D expenditures through tax credit. We rely on this policy to identify the firm response to an exogenous countercyclical fiscal shock. Large heterogeneity by the size of cash is observed for firms in traditional industries. The tax credit caused higher expenditures for firms with relative large cash holdings. For firms characterized by low levels of cash, the stimulus was instead mainly useful to counteract the negative effects of the credit crunch. No impact is observed among hightech firms consistent with their tendency to smooth R&D. Our findings complement those on household response to tax rebate in US and Italy, offering new evidence for evaluating fiscal stimulus programmes. JEL classification : E21, E62