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CEP discussion paper
Opening up military innovation: causal effects of 'bottom-up' reforms to U.S. defense research
Sabrina T. Howell, Jason Rathje, John Van Reenen and Jun Wong April 2021
Paper No' CEPDP1760:
Full Paper (pdf)

JEL Classification: O31; O32; O38; H56; H57

Tags: innovation; defense; r&d; procurement

Organizations investing in R&D must decide whether to solicit specific technologies or allow innovators to suggest ideas. Using administrative data, we study the 'Open' reform to U.S. Air Force R&D procurement, which invited firms to suggest any new potentially useful technology. The new program was run simultaneously with the traditional top-down 'Conventional' program. Our regression discontinuity design offers the first causal evaluation of a defense R&D program. We document benefits from winning an Open award for VC funding, military technology, and innovation, and no benefits from Conventional, which instead fosters incumbency. The bottom-up approach appears to help explain Open's success.