Cutting the Innovation Engine: How Federal Funding Shocks Affect University Patenting, Entrepreneurship, and Publications
56 Pages Posted: 17 Apr 2020 Last revised: 20 Oct 2022
Date Written: August 30, 2022
This paper studies how federal funding affects the innovation outputs of university researchers. We link person-level research grants from 22 universities to patents, publications, and career outcomes from the U.S. Census Bureau. We focus on the effects of large, idiosyncratic, and temporary cuts to federal funding in a researcher’s pre-existing narrow field of study. Using an event study design, we document that these negative federal funding shocks reduce high-tech entrepreneurship and publications, but increase patenting. The lost publications tend to be higher quality and more basic, while the additional patents tend to be lower quality, less general, and more often privately assigned. These federal funding cuts lead to an increase in private funding, which partially compensates for the decline in federal funding. Together with evidence from industry-university contracts, the results suggest that federal funding cuts shift university research funding from federal to private sources and lead to innovation outputs that are less openly accessible and more often appropriated by corporate funders.
Keywords: Innovation, Science Funding, Universities, Entrepreneurship, Training
JEL Classification: O3, G18, G38, I2
Suggested Citation: Suggested Citation