Federal funding and the rate and direction of inventive activity

Leveraging a new measure of patent citation trees (Corredoira and Banerjee, 2015), we demonstrate that research funded by the federal government is associated with more active and diverse technological trajectories. Our findings tie government funding to breakthrough inventions. The differences are especially evident at the upper percentiles of the distribution of long term patent influence and stem primarily from research conducted outside the federal government and sponsored by the DOD, HHS and NSF. Government funded patents are inputs into a broader range of technologies. Additional analyses indicate that federal programs invest in some technological areas that private corporations eschew, and federally funded university patents are in different technological classes than non-federally funded university patents. In this sense, the government may play an irreplaceable role in the rate and direction of inventive activity.