The Color of Money: Federal vs. Industry Funding of University Research
U.S. universities have experienced a shift in research funding away from federal and towards private industry sources. This paper evaluates whether the source of funding – federal or private industry – is relevant for commercialization of research outputs. We link person-level grant data from 22 universities to patent and career outcomes (including IRS W-2 records). To identify a causal effect, we exploit individual-level variation in exposure to narrow federal R&D programs stemming from pre-existing field specialization. We instrument for the researcher’s funding sources with aggregate supply shocks to federal funding within these narrow fields. The results show that a higher share of federal funding reduces patenting and the chances of joining an incumbent firm, while increasing the chances of high- tech entrepreneurship and of remaining employed in academia. A decline in the federal share of funding is offset by an increase in the private share of funding, which has opposite effects. We conclude that the incentives of private funders to appropriate research outputs have important implications for the trajectory of university researcher careers and intellectual property.
We thank Pierre Azoulay, Lauren Cohen, Daniel Gross, Scott Kominers, Natsuko Nicholls, Jason Owen-Smith, and Beth Uberseder, as well as participants at the NSF Future of IP conference. For helpful research assistance, we thank Belinda Chen and Jun Wong. Howell’s research on this project was funded by the NBER Science of Science Program, sponsored by the Sloan Foundation, and by the Kauffman Foundation. This paper uses data from the U.S. Census Bureau. Any views expressed are those of the authors and not those of the U.S. Census Bureau. The Census Bureau’s Disclosure Review Board and Disclosure Avoidance Officers have reviewed this data product for unauthorized disclosure of confidential information and have approved the disclosure avoidance practices applied to this release. (DRB Approval Numbers CBDRB-FY20-152, CBDRB-FY20-CES009-004, and CBDRB-FY20-CES009-006). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.