Government R&D doesn’t drive innovation – private corporations are more likely to result in commercialized products
Daniel F. Spulber, 2015 - Elinor Hobbs Distinguished Professor of International Business and Professor of Strategy at the Kellogg School of Management at Northwestern. “Public Prizes versus Market Prices: Should Contents Replace Patents,” 97 J. PAT. & TRADEMARK OFF. SOC'y 690 (2015). Hein Online, Accessed via University of Michigan //DH
Government subsidies are not close substitutes for market incentives for innovation. The National Science Board estimates that federal agencies provided over $132 billion for R&D.87 Wright et al. find that even though corporations provide just over 5% of U.S. university research funding, "corporate-sponsored research is surprisingly valuable for further innovation."88 As they observe: "Data collected over 20 years at nine campuses and three national laboratories administered by the University of California show that corporate-sponsored inventions are licensed and cited more often than federally sponsored ones."89
Government agencies would replace decentralized markets with centralized allocation. Government agencies are not well equipped to run market places. Health insurance exchanges are an example of government market place design.90 Government allocation of goods and services often entails high administrative costs, significant transaction costs, and allocative inefficiencies. 91 Historical evidence suggests that state and federal regulation led to considerable allocative and dynamic inefficiencies in markets for electric power, natural gas, telecommunications, railroads, trucking, and airlines. 92 Increased regulation in health care is expected to generate similar allocative and dynamic inefficiencies. 93