Opening Up Military Innovation: Causal Effects of Reforms to U.S. Defense Research

102 Pages Posted: 26 Apr 2021 Last revised: 2 Jan 2023

See all articles by Sabrina T. Howell

Sabrina T. Howell

New York University (NYU) - New York University

Jason Rathje

Government of the United States of America - U.S. Air Force Academy

John Van Reenen

London School of Economics - Centre for Economic Performance (CEP); Stanford Graduate School of Business; Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR)

Jun Wong

New York University (NYU)

Date Written: April 2021

Abstract

There is little econometric study of how governments should procure innovation. One choice facing policymakers is whether to tightly specify the innovations they seek (a “Conventional” approach) or to allow firms to suggest ideas (an “Open” approach). We exploit a natural experiment in the widely emulated Small Business Innovation Research (SBIR) program. From 2018, the U.S. Air Force simultaneously held Open and Conventional competitions. We compare them using within-competition regression discontinuity designs on administrative data from 2003 to 2019. Open awards positively affect desired government outcomes: military benefits from the adoption of new technologies measured by (non-SBIR) defense contracts and private commercial innovation measured by VC funding and patenting. By contrast, Conventional awards have no effects on these outcomes, and instead only foster SBIR incumbency. We show that the greater specificity of Conventional topics helps to explain these differences. The results point to benefits from open innovation.

Suggested Citation

T. Howell, Sabrina and Rathje, Jason and Van Reenen, John Michael and Van Reenen, John Michael and Wong, Jun, Opening Up Military Innovation: Causal Effects of Reforms to U.S. Defense Research (April 2021). NBER Working Paper No. w28700, Available at SSRN: https://ssrn.com/abstract=3834140

Sabrina T. Howell (Contact Author)

New York University (NYU) - New York University

Jason Rathje

Government of the United States of America - U.S. Air Force Academy

John Michael Van Reenen

London School of Economics - Centre for Economic Performance (CEP) ( email )

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Stanford Graduate School of Business ( email )

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Institute for Fiscal Studies (IFS) ( email )

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Centre for Economic Policy Research (CEPR)

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Jun Wong

New York University (NYU) ( email )

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New York, NY 10003-711
United States

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