Working Paper: NBER ID: w28700
Authors: Sabrina T. Howell; Jason Rathje; John Van Reenen; Jun Wong
Abstract: How should governments procure innovation? One choice facing policymakers is whether to tightly specify the innovations they seek (a “Conventional” approach) or to allow firms to suggest ideas (an “Open” approach). We study a natural experiment in the U.S. Air Force Small Business Innovation Research (SBIR) program where Open and Conventional competitions were held simultaneously. We compare them using within-competition regression discontinuity designs on administrative data. Open awards increase desired outcomes; they lead to more adoption of new technologies, measured by (non-SBIR) defense contracts, and more commercial innovation, measured by VC funding and patenting. In contrast, Conventional awards have no effects on these outcomes but do create lock-in through increasing the chances of winning a future SBIR award. The Open program succeeded in its aim of attracting new types of firms, but we demonstrate that openness has a differential impact beyond inducing selection: (i) comparing specific and non-specific Conventional topics; (ii) examining firms that applied to both Open and Conventional programs; and (iii) comparing Open with two other reform programs that attracted similar types of firms to Open but used specific topics. Overall, the results point to benefits from open approaches to innovation procurement.
Keywords: military innovation; defense research; SBIR program; innovation procurement
JEL Codes: H56; H57; O31; O32; O33; O36; O38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Winning open topic competition (Z00) | Increased likelihood of military adoption of new technology (O33) |
| Winning open topic competition (Z00) | Increased non-SBIR DoD contracts (H56) |
| Winning open award (D44) | Increased probability of subsequent VC investment (G24) |
| Winning open award (D44) | Positive effects on patenting (O34) |
| Winning open award (D44) | Positive effects on patent originality (O34) |
| Winning conventional award (D44) | No measurable effects on outcomes (C90) |
| Winning conventional award (D44) | No significant impact on technology adoption (O33) |
| Winning conventional award (D44) | No significant impact on commercial innovation (O36) |