Opening up Military Innovation : Causal Effects of ‘Bottom-Up’ Reforms to U.S. Defense Research

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