Innovation for hire: a descriptive study of federal acquisitions and contractor R&D

This paper aims to investigate the extent to which federal acquisitions motivate private-sector partner firms’ investment in innovation.

Archival, Empirical.

This study finds that federal acquisitions are positively associated with contractors’ R&D spending but that the intensity of R&D spending is indistinguishable between firms’ government and private sectors (non-government) contracts. This study also develops a novel measure of the intensity of contractor R&D spending on public sector relative to private-sector clients and assesses construct validity of the measure.

Cultivating innovation is an explicit goal of federal procurement. Innovation is critical to addressing the nation’s collective problems. The results should be of interest to scholars and practitioners, particularly acquisition personnel, one of whose responsibilities is to efficiently steward tax revenues to the most productive (contracting) use.

This study is descriptive in nature and helps to illuminate the extent and conditions under which federal acquisition activity motivates investment in innovation by private-sector partners. These results speak to how effectively government contracting motivates private-sector innovation, which clearly has implications for fiscal stewardship. Additionally, private-sector innovation affects stock price formation. Collectively, these results imply that the extent to which acquisitions motivate innovation has material implications on our country’s fiscal health.