Opening up Military Innovation: Causal Effects of ‘Bottom-Up’ Reforms to U.S. Defense Research

Abstract

For governments procuring innovation, one choice is whether to specify desired products (a “Conventional” approach) or allow firms to suggest ideas (an “Open” approach). Using a U.S. Air Force R&D grant program, where Open and Conventional competitions were held simultaneously, we find that Open awards increase both commercial innovation and technology adoption by the military. In contrast, Conventional awards have no positive effects on new technology, but do create more program lock-in. We present evidence that openness matters independently from inducing differential selection, for example of less well-established firms. These results suggest benefits from open approaches to innovation procurement. 

Keywords: Innovation, defense, R&D, procurement

JEL Classification: O31, O32, O38, H56, H57