Public Contracting for Private Innovation: Government Expertise, Decision Rights, and Performance Outcomes
71 Pages Posted: 25 Jun 2018
Date Written: June 1, 2018
We examine how the U.S. Federal Government governs R&D contracts with private-sector firms. The government chooses between two contractual forms: grants and cooperative agreements. The latter provides the government substantially greater discretion over, and monitoring of, project progress. Using novel data on R&D contracts and on the geo-location and technical expertise of each government scientist over a 12-year period, we test implications from the organizational economics and contracting literatures. We find that cooperative agreements are more likely to be used for early-stage projects and those for which local government scientific personnel have relevant technical expertise; in turn, cooperative agreements yield greater innovative output as measured by patents, controlling for endogeneity of contract form. The results are consistent with multi-task agency and transaction-cost approaches that emphasize decision rights and monitoring.
Keywords: Contracting for Innovation, Organizational Economics, Transaction Costs, R&D, Technological Expertise, Capabilities
JEL Classification: O32, L33, H57, H11, L14, L24
Suggested Citation: Suggested Citation