Fact of the Week: R&D Spending During WWII Spurred a Sustained Wave of Innovation That Lasted Through the 1970s
Source: Daniel P. Gross and Bhaven N. Sampat, “America, Jump-started: World War II R&D and the Takeoff of the U.S. Innovation System,” NBER Working Paper Series, no. w27375 (July 2023).
Commentary: In a July 2023 working paper for the National Bureau of Economic Research, Daniel P. Gross and Bhaven N. Sampat analyzed the long-run effects of government-funded R&D, and the associated issuing of patents, in the decades following World War II. They focus on the swift rise in R&D from the Office of Scientific Research and Development (OSRD) and how it affected trends in innovation during and after the war. In this case, the study measured innovation by looking at the number of patents. The study involved analyzing the OSRD’s more than 2,200 contracts from 1940 to 1945. Those contracts had 7,900 inventions and over 3,100 patents associated with them. The results of the study highlight the critical role the U.S. government played in financing and developing patented technologies coming out of regional technology clusters.
The authors note that almost 1 out of every 8 patented innovations received funding for its development from the U.S. government at the height of the war. The study primarily looked at how OSRD-funded research, along with the associated patenting, affected the trend in patenting in the post-war period through the 1970s. The authors defined the OSRD rate as the share of patents in a given technology cluster that the OSRD funded. Their findings showcased how the rapid increase in OSRD-funded research spurred a sustained takeoff in patented innovations. In particular, the study found that for every doubling in the OSRD rate for a given technology cluster in the 1940s, there was an associated 30 percent increase in the number of patents by 1970.
The study also looked at the effects of OSRD-funded innovation on employment and business creation in high-tech industries (e.g., electronic parts). In the case of employment, a doubling in the OSRD rate was associated with a more than double increase in high-tech manufacturing employment in 1980. Additionally, a doubling in the OSRD rate was associated with more than a doubling in the number of new high-tech manufacturing businesses by the 1970s. These findings provide new evidence of the positive spillovers of government-funded R&D over the long run.
