Public contracting for private innovation : government expertise, decision rights, and performance outcomes

Author / Creator

Bruce, Joshua R., author

Available as

Online

Summary

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 provi...

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.

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