Public Contracting for Private Innovation: Government Expertise, Decision Rights, and Performance Outcomes
We examine how the U.S. Federal Government governs R&D contracts with private-sector firms. The government chooses between two contractual forms: grants and cooperative agreements. The latter provides the government substantially greater discretion over, and monitoring of, project progress. Using novel data on R&D contracts and on the geo-location and technical expertise of each government scientist over a 12-year period, we test implications from the organizational economics and contracting literatures. We find that cooperative agreements are more likely to be used for early-stage projects and those for which local government scientific personnel have relevant technical expertise; in turn, cooperative agreements yield greater innovative output as measured by patents, controlling for endogeneity of contract form. The results are consistent with multi-task agency and transaction-cost approaches that emphasize decision rights and monitoring.
We are grateful to Jean-Etienne de Bettignies, Robert Gibbons, Ricard Gil, Mitch Hoffman, Chris McKenna, Arti Rai, Pablo Spiller, Jesper Sørensen, Giorgio Zanarone; seminar participants at CUNEF, George Mason University, Queens University, Stanford University, and the University of California, Berkeley; and attendees at the Society for Institutional and Organizational Economics and Mack Institute/Wharton Technology & Innovation Conference, for comments on previous drafts of this paper. This study is based upon work supported by the National Science Foundation under Grants Numbers 1061600 and 1443014. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Bruce, Joshua R., John M. de Figueiredo, and Brian S. Silverman (2019). “Public Contracting for Private Innovation: Government Capabilities, Decision Rights, and Performance Outcomes,” Strategic Management Journal 40(4): 533-555.