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

See all articles by Tania Babina

Tania Babina

Columbia University - Columbia Business School, Finance

Alex Xi He

University of Maryland - Robert H. Smith School of Business

Sabrina T Howell

New York University (NYU) - Leonard N. Stern School of Business; National Bureau of Economic Research (NBER)

Elisabeth Perlman

U.S. Census Bureau

Joseph Staudt

U.S. Census Bureau

Date Written: August 30, 2022

Abstract

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

Babina, Tania and He, Alex Xi and Howell, Sabrina T and Perlman, Elisabeth and Staudt, Joseph, Cutting the Innovation Engine: How Federal Funding Shocks Affect University Patenting, Entrepreneurship, and Publications (August 30, 2022). Available at SSRN: https://ssrn.com/abstract=3560195 or http://dx.doi.org/10.2139/ssrn.3560195

Tania Babina

Columbia University - Columbia Business School, Finance ( email )

3022 Broadway
New York, NY 10027
United States

Alex Xi He (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

HOME PAGE: http://www.alexxihe.com/

Sabrina T Howell

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States
212-998-0913 (Phone)

HOME PAGE: http://www.sabrina-howell.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Elisabeth Perlman

U.S. Census Bureau ( email )

4600 Silver Hill Road
D.C., WA 20233
United States

Joseph Staudt

U.S. Census Bureau ( email )

4600 Silver Hill Road
D.C., WA 20233
United States

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