The Missing Link(s) Government Contracting and Patenting

The federal government is the largest individual buyer of U.S. goods. As such, the procurement decisions of its agencies can have far reaching consequences. In this paper a dataset on the universe of federal procurement contracts is combined with a novel identification strategy to assess the impact of being awarded a government contract on a corporation’s innovative output. While the existing literature has found a positive treatment effect, I am unable to replicate this result. As prior findings were at a macro level, I conclude that the effect is equally split between the winners and losers in procurement awards. These findings support a competition hypothesis, in which government contracts are awarded based on a firm’s innovativeness, leading to increased competition and performance along this dimension ex-ante