Innovation for Hire: A Descriptive Study of Federal Acquisitions and Contractor R&D
38 Pages Posted: 8 Nov 2019 Last revised: 7 Aug 2020
Date Written: August 3, 2020
In 2016, the U.S. Federal government procured goods and services totaling $460 billion, or over two percent of America’s gross domestic product. Innovation is a key goal of Federal procurements, but it is unclear whether acquisitions help achieve this objective. We explore firms’ innovation over an eight-year period and find that firms increase research and development commensurate with government contracts. We also create a measure that ranks firms on the intensity of innovation on government relative to non-government contracts. Tests deploying this tool show that firms with the most (least) research and development on government (relative to private) contracts produce innovative goods such as missiles (security guards). Results suggest that Federal acquisitions motivate innovation at levels that are appropriate to the nature of requisitioned goods or services. These results should be of interest to practitioners and acquisition personnel who serve a common goal of efficiently deploying a finite pool of taxpayer-generated revenues to the most productive use.
Keywords: R&D, innovation, research, development, procurement, defense, government contracts, DoD
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