Opening Up Military Innovation: Causal Effects of Reforms to US Defense Research

For governments procuring innovation, one choice is whether to specify desired products (a conventional approach) or allow firms to suggest ideas (an open approach). Using a US Air Force R&D grant program where open and conventional competitions were held simultaneously, we find that open awards increase both commercial innovation and technology adoption by the military. In contrast, conventional awards have no positive effects on new technology but do create more program lock-in. We present evidence that openness matters over and above inducing differential selection, for example, of less well-established firms. These results suggest benefits from open approaches to innovation procurement.