John Van Reenen (LSE) (Webinar)

“Opening up Military Innovation: Causal Effects of Reforms to U.S. Defense Research”

Abstract: Amid growing concerns about consolidation and technological insularity among its prime contractors, the U.S. Department of Defense reformed a key program through which innovations and firms enter the defense sector. From 2018, the “Open” approach invited firms to suggest ideas, while the “Conventional” approach, which ran simultaneously, solicited specific technologies. We compare the programs using regression discontinuity designs on administrative data from 2003-19. Open awards positively affect VC funding, new military technologies, and innovation. Conventional
awards have no effects on these outcomes, but foster incumbency. The greater specificity of Conventional topics explains these differences, implying significant benefits from open innovation.

JEL: O31, O32, O38, H56, H57
Keywords: Innovation, defense, R&D, procurement

Joint with Sabrina T. Howell, Jason Rathje and Jun Wong.