DARPA model empirically boosts innovation and accesses their startup and venture capital warrants

Going way beyond simply funding research, DARPA funded the formation of computer science departments, provided start-up firms with early research support, contributed to semiconductor research and support to human-computer interface research and oversaw the early stages of the Internet. Many of these critical activities were carried out by its Information Processing Techniques Office, originally established in 1962. Such strategies contributed hugely to the development of the computer industry during the 1960s and 1970s, and many of the technologies later incorporated in the design of the personal computer were developed by DARPA-funded researchers (Abbate 1999).

Another key event during this period was the new innovation environment that emerged after a group of scientists and engineers in 1957 broke away from a firm started by William Shockley (Block 2011). The rebellious group of scientists and engineers, often referred to as the 'traitorous eight', went on to form Fairchild Semiconductor, a new firm that advanced semiconductor technology and continued 'a process of economic fission that was constantly spinning off new economic challengers' (Block and Keller 2011a, 12-13). Lazonick (2009) adds that the spinoff culture ultimately began with Fairchild Semiconductor— and the firm owed nearly all of its growth to military procurement. The spinoff business model became viable and popular for technological advancement following the 1957 revolt, yet would not have been possible without State involvement and its functioning as a major early customer. A new paradigm emerged that resulted in innovative ideas moving from lab to market in far greater quantity.

Before this, government officials' leverage in generating rapid technological advancement was limited, as large defence firms still deflected the pressure and demands for innovation with the tremendous power they wielded. The leverage government officials had in advancing innovative breakthroughs was also limited by the small number of firms with such capabilities. Bonded by a shared interest in avoiding the certain risks that accompanied an uncertain technological path, the firms resisted government pressure for innovation. However, in a new environment with ambitious start-ups, the opportunity for generating real competition among firms presented itself more fully.

Programme officers at DARPA recognized the potential this new innovation environment provided and were able to take advantage of it, focusing at first on new, smaller firms to which they could provide much smaller funds than was possible with the larger defence contractors. These firms recognized the need for ambitious innovation as part of their overall future viability. With small, newer firms engaged in real competition and as the spinoff model became more institutionalized, Block (2008) notes that large firms also had to get on board with this quest for rapid innovative breakthroughs. By taking advantage of this new environment, the government was able to play a leading role in mobilizing innovation among big and small firms, and in university and government laboratories. The dynamic and flexible structure of DARPA, in contrast to the more formal and bureaucratic structure of other government programmes, allowed it to maximize the increased leverage it now had in generating real competition across the network.

Using its funding networks, DARPA increased the flow of knowledge across competing research groups. It facilitated workshops for re- searchers to gather and share ideas while also learning of the paths identified as 'dead ends' by others. DARPA officers engaged in business and technological brokering by linking university researchers to entrepreneurs interested in starting a new firm, connecting start-up firms with venture capitalists, finding a larger company to commercialize the technology, or assisting in procuring a government contract to support the commercialization process.

Pursuing this brokering function, DARPA officers not only developed links among those involved in the network system, but also engaged in efforts to expand the pool of scientists and engineers working in specific areas. An example of this is the role DARPA played in the 1960s by funding the establishment of new computer science departments at various universities in the US. By increasing the number of researchers who possessed the necessary and particular expertise, DARPA was able, over an extended period of time, to accelerate technological change in this area. In the area of computer chip fabrication during the 1970s, DARPA assumed the expenses associated with get- ting a design into a prototype by funding a laboratory affiliated with the University of Southern California. Anyone who possessed a superior design for a new microchip could have the chips fabricated at this laboratory, thus expanding the pool of participants designing faster and better microchips.

The personal computer emerged during this time with Apple introducing the first one in 1976. Following this, the computer industry's boom in Silicon Valley and the key role of DARPA in the massive growth of personal computing received significant attention, but have since been forgotten by those who claim Silicon Valley is an example of 'free market' capitalism. In a recent documentary, Something Ventured, Something Gained, for example, the role of the State is not mentioned once in the 85 minutes spent describing the development of Silicon Valley (Geller and Goldfine 2012).

Also, during the 1970s, the significant developments taking place in biotechnology illustrated to policymakers that the role of DARPA in the computer industry was not a unique or isolated case of success. The decentralized form of industrial policy that played such a crucial role in setting the context for the dramatic expansion of personal com- puting was also instrumental in accelerating growth and development in biotechnology.