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Fueling the Fire? How Government Support Drives Technological Progress and Complexity

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  • Carolin Nast
  • Tom Broekel
  • Doris Entner

Abstract

This study investigated two major trends shaping contemporary technological progress: the growing complexity of innovation and the increasing reliance on government support for private research and development (R&D). We analyzed United States patent data from 1981 to 2016 using structural vector autoregressions and uncovered an indirect interplay between these trends. Our findings showed that government incentives and support played a crucial role in spurring private-sector innovation. This government-fueled innovation, in turn, paved the way for advancements in more intricate and sophisticated technological areas. Our study sheds light on the dual role of the United States' innovation policy over the past four decades; the policy has not only accelerated technological advancement but also steered it toward increasingly complex domains. While this trend presents opportunities for economic growth and technological breakthroughs, it also poses challenges, including the potential for further escalating R&D costs. This research has significant implications for policymakers and industry leaders, suggesting a need for a balanced approach to fostering innovation while considering the long-term economic and technological landscape.

Suggested Citation

  • Carolin Nast & Tom Broekel & Doris Entner, 2024. "Fueling the Fire? How Government Support Drives Technological Progress and Complexity," Papers in Evolutionary Economic Geography (PEEG) 2407, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Apr 2024.
    • Handle: RePEc:egu:wpaper:2407
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    More about this item

    Keywords

    Innovation; patents; technological complexity; government R&D;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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