DP20788 The Public Origins of American Innovation
We document new empirical patterns linking the institutional design of American innovation to postwar productivity and growth of the U.S. economy. Using recently digitized patent data that distinguish funding sources and ownership structures, we find that government-funded but privately-owned patents — though only 2% of the total — account for roughly 20% of medium-term fluctuations in TFP and GDP growth. These patents are also associated with stronger business-sector investment in R&D. Privately funded patents display significant but smaller aggregate comovements, whereas publicly owned patents have muted average effects yet are more prevalent among disruptive innovations in health and biotechnology. Patents funded by the NIH and NSF exhibit the strongest links to subsequent productivity gains and R&D spillovers, while research institutes and universities outperform for-profit firms in transforming public funds into high-impact innovation. Taken together, our findings highlight the central role of government support in sustaining U.S. technological leadership and economic growth.
