Stimulating spin-outs and stalled subsequent technological development: Laser diodes in the United States and Japan under the SBIR program

How does the existence or absence of employee startups influence the patterns of subsequent technological development? By studying the development of laser diode technology in the U.S. and Japan at both the inventor and organizational levels using the difference-in-differences approach, this study empirically examines the impact of opportunities for startups promoted by SBIR in the U.S. on the technological trajectory of existing technology. According to the estimation results, an increase in employee startups promoted by SBIR could impede the subsequent development of the current technology earlier and cause it to stagnate at a lower level than what could have been achieved with no employee startups (as seen in Japan). This implies that the cumulative effects of technological development could vanish if R&D personnel strategically exit their parent firms to target different submarkets. • Examines SBIR-induced employee startups and their impact on technological trajectories • Uses difference-in-differences analysis on U.S. and Japanese laser diode patents • Finds SBIR-induced spinouts reduce cumulative basic R&D on core laser diode technology • Reveals policy trade-offs between short-term commercialization and deep tech advancement