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Private Investor Participation and Commercialization Rates for Government‐sponsored Research and Development: Would a Prediction Market Improve the Performance of the SBIR Programme?

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  • ALBERT N. LINK
  • JOHN T. SCOTT

Abstract

An objective of the US Small Business Innovation Research (SBIR) programme is the private sector commercialization of funded R&D projects. However, our estimate of the actual or expected probability of commercialization of such R&D is fairly low; our analysis of Department of Defense (DoD) Phase II awards suggests that the estimated probability of commercialization is only 0.47. We investigate econometrically whether outside private investors have useful information about proposed SBIR projects' prospects for commercialization. Our findings suggest that they do, thereby providing support for the possibility that a prediction market could improve the performance of the SBIR programme.

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  • Albert N. Link & John T. Scott, 2009. "Private Investor Participation and Commercialization Rates for Government‐sponsored Research and Development: Would a Prediction Market Improve the Performance of the SBIR Programme?," Economica, London School of Economics and Political Science, vol. 76(302), pages 264-281, April.
    • Handle: RePEc:bla:econom:v:76:y:2009:i:302:p:264-281
    DOI: 10.1111/j.1468-0335.2008.00740.x
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    1. Manski, Charles F., 2006. "Interpreting the predictions of prediction markets," Economics Letters, Elsevier, vol. 91(3), pages 425-429, June.
    2. John Scott, 2000. "The Directions for Technological Change: Alternative Economic Majorities and Opportunity Costs," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 17(1), pages 1-16, August.
    3. David B. Audretsch & Albert N. Link & John T. Scott, 2013. "Public/private technology partnerships: evaluating SBIR-supported research," Chapters, in: Public Support of Innovation in Entrepreneurial Firms, chapter 5, pages 91-104, Edward Elgar Publishing.
    4. Justin Wolfers & Eric Zitzewitz, 2004. "Prediction Markets," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 107-126, Spring.
    5. Wolfers, Justin & Zitzewitz, Eric, 2006. "Interpreting Prediction Market Prices as Probabilities," IZA Discussion Papers 2092, Institute of Labor Economics (IZA).
    6. Martin, Stephen & Scott, John T., 2000. "The nature of innovation market failure and the design of public support for private innovation," Research Policy, Elsevier, vol. 29(4-5), pages 437-447, April.
    7. Kohn, Meir & Scott, John T, 1982. "Scale Economies in Research and Development: The Schumpeterian Hypothesis," Journal of Industrial Economics, Wiley Blackwell, vol. 30(3), pages 239-249, March.
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