Draca, Mirko (2013) Reagan’s innovation dividend? Technological impacts of the 1980s US defense build-up. Working Paper. Coventry, UK: Department of Economics, University of Warwick. CAGE Online Working Paper Series, Volume 2013 (Number 168).

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Abstract

US government spending since World War II has been characterized by large
investments in defense related goods, services and R&D. In turn, this means that the
Department of Defense (DoD) has had a large role in funding corporate innovation in the
US. This paper looks at the impact of military procurement spending on corporate
innovation among publicly traded firms for the period 1966-2003. The study utilizes a
major database of detailed, historical procurement contracts for all Department of
Defense (DoD) prime contracts since 1966. Product-level spending shifts – chiefly
centered around the Reagan defense build-up of the 1980s – are used as a source of
exogenous variation in firm-level procurement receipts. Estimates indicate that defense
procurement has a positive absolute impact on patenting and R&D investment, with an
elasticity of approximately 0.07 across both measures of innovation. In terms of
magnitudes, the contribution of defense procurement to innovation peaked during the
early Reagan build-up, accounting for 11.4% of the total change in patenting intensity
and 6.5% for R&D. This compares to a defense sector share in output of around 4%. The
later defense cutbacks under Bush Senior and Clinton then curbed the growth in
technological intensity by around 2%.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	E History America > E151 United States (General) T Technology > T Technology (General)
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Technological innovations -- United States -- Economic aspects , United States. Department of Defense, Reagan, Ronald, Air forces -- Procurement
Series Name:	CAGE Online Working Paper Series
Publisher:	Department of Economics, University of Warwick
Place of Publication:	Coventry, UK
Official Date:	September 2013
Dates:	Date Event September 2013 Published
Volume:	Volume 2013
Number:	Number 168
Number of Pages:	48
Status:	Not Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
Date of first compliant deposit:	21 December 2016
Date of first compliant Open Access:	21 December 2016

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