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

John van Reenen, Sabrina Howell and Jason Rathje

No 16063, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: When investing in research and development (R&D), institutions must decide whether to take a top-down approach – soliciting a particular technology – or a bottom-up approach in which innovators suggest ideas. This paper examines a reform to the U.S. Air Force Small Business Innovation Research (SBIR) program that transitioned from “Conventional topics,†which solicit specific technologies, to “Open topics,†which invite firms to suggest any new technology that may be useful to the Air Force. The reform seeks to address challenges facing military R&D, in particular a less innovative defense industrial base. We show that the Open program attracts new entrants, defined as younger firms and those without previous defense SBIR awards. In a regression discontinuity design that offers the first causal evaluation of a defense R&D program, we show that winning an Open award increases future venture capital investment, non-SBIR defense contracting, and patenting. Conventional awards have no effect on these outcomes but do increase the chances of future defense SBIR contracts, fostering incumbency. The bottom-up approach appears to be a mechanism behind Open's success. For example, winning has a positive effect on innovation even in less specific Conventional topics. The results suggest that government (and perhaps private sector) innovation could benefit from more bottom-up, decentralized approaches that reduce barriers to entry, minimize lock-in advantages for incumbents, and attract a wider range of new entrants.

Keywords: Innovation; Defense; R&d; Procurement (search for similar items in EconPapers)
JEL-codes: H56 H57 O31 O32 O38 (search for similar items in EconPapers)
Date: 2021-04
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP16063 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:16063

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP16063

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().