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

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 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 that public initiatives were good at identifying RJV's that would be best situated to generate spillovers. Rather, federal initiatives appear to have channeled resources to ventures that private parties could have been expected to pursue absent subsidies. The government selected the wrong ventures to subsidize.The conclusion derives from examination of 171 RJV contracts. RJV's involving technologies that were less susceptible to unintended spillover have tended to exploit contractual mechanisms to contain spillovers. Government-subsidized ventures were more likely to exploit those same mechanisms