Buyers' role in innovation procurement: Evidence from US military R&D contracts

Does the unexpected death of relevant public officers affect the innovation outcomes of R&D procurement contracts in the US military?

Understanding the role of public buyers in innovation procurement is crucial, as their effectiveness directly impacts the success of R&D contracts funded by federal agencies. Our study highlights the potentially significant consequences of managerial disruptions caused by unexpected deaths, suggesting that efficient public procurement practices are essential for fostering innovation and ensuring that taxpayer money results in valuable patents and innovations.

We analyzed a dataset covering 1,750 R&D procurement contracts awarded by US federal agencies, particularly focusing on the Department of Defense, from 2006 to 2012. We developed an empirical strategy to quantify the impact of the death of relevant employees on innovation outcomes, specifically examining the number of patents, citations, and claims derived from these contracts. By exploiting variations in relevant employee deaths before contract awards, we employed regression analysis, including fixed effects for bureau and contract specifications.

We found that a 1% increase in the share of relevant employee deaths leads to declines of 32.3% in patents per contract, 20.5% in patent citations per contract, and 34.3% in patent claims per contract, indicating that managerial deaths significantly disrupt innovation outcomes. Further analysis showed that these negative effects are primarily driven by deaths occurring within six months prior to contract awards. Also, cooperation within offices enhanced R&D outcomes, but could not mitigate the negative impacts of relevant employee deaths.

• Dataset of 1,750 US federal R&D contracts awarded between 2006 and 2012, with an overall value of $10.8 billion
• Federal Procurement Data System (FPDS) for contract details
• 3PFL Database of Federally Funded Patents for patent outcomes linked to contracts

• We assume that the unexpected deaths of relevant employees are exogenous shocks affecting the procurement process.
• We assume that data on employee deaths are accurately represented and reflect true variations affecting R&D outcomes.
• We assume that the effectiveness of public buyers in managing procurement processes significantly influences innovation outcomes.