Federal Funding and the Rate and Direction of Inventive Activity

Abstract

Leveraging a new measure of patent citation trees (Corredoira & Banerjee, 2015), we demonstrate that research funded by the federal government is likely to spark more active technological trajectories. Our findings tie government funding to the generation of breakthrough inventions. The differences are only evident at the upper percentiles of the distribution of long term patent influence and stem primarily from research conducted at universities and academic medical centers that is sponsored by the DOD, HHS and NSF. Additional analyses indicate that federal programs invest in many technological areas that private corporations eschew. In this sense, the government affects both the rate and direction of inventive activity.

Keywords: Patent Influence, Technological Evolution, Breakthrough Invention, Federal Grants, Federal Government Agencies

JEL Classification: O30, O31, O32, O33, O38, H50, H54