Knowledge Spillovers and Industrial Policy: Evidence from the Advanced Technology Program, the Department of Defense

Abstract: For a generation the federal government has maintained programs promoting research joint ventures (RJV’s). The ostensible motivation late in the going was to promote knowledge spillovers. The real motivation, at least initially, was to stem the perceived decline of American competitiveness. It is not obvious, however, that federal government initiatives had any effect with respect to either knowledge spillovers or ‘competitiveness’. It is not obvious, for example, that public initiatives were good at identifying RJV’s that would be best situated to generate spillovers. If anything, federal initiatives appear to have channeled resources to ventures that involved little in the way of spillovers – that is, to just the kind of ventures that private parties could have been expected to pursue absent government supports. The conclusion derives from examination of the structure of 171 RJV contracts. RJV’s involving technologies that were less susceptible to unintended spillover have tended to exploit contractual mechanisms to contain spillovers. It turns out that government-subsidized ventures tended to aggressively exploit those same contractual mechanisms. In contrast, non-subsidized ventures as a whole have tended to be less aggressive about exploiting these mechanisms. One is left with the curious result that, insofar as any ventures were occupied with inducing knowledge spillovers – what RJV partners would then call ‘knowledge transfers’ – they tended to be non-subsidized ventures.