Strategic investment of public funds: State responses to federal R&D grants

Abstract This paper assesses the impact of federal grants for research and development (R&D) on state R&D investment in the United States. We find that federal grants for academic R&D do not significantly influence state allocations to academic institutions from 2006 to 2021. By contrast, R&D performed by agencies of the state government is estimated to grow by $0.35 with each additional dollar of federal support. We argue that these divergent results reflect the localized nature of benefits generated from R&D performed by state government agencies compared to university-based research. A computational text analysis of recent federal R&D awards to academic institutions and state agencies corroborates this hypothesis.