The importance of “spillovers” in the policy mission of the advanced technology program

Government policies like the Advanced Technology Program (“ATP”) are intended, at least in part, to remedy the “market failure” inherent in the fact that a significant portion of the social benefits of new knowledge and technology are not captured by a firm that invests in R&D. ATP’s project selection, and its evaluation of the impact of its program, can be made more effective by explicitly incorporating the analysis of such “spillovers.” For project selection, this means identifying technological, organizational and economic factors that tend to oint to a large “spillover gap,” or deviation between the social and private rates of return to a proposed project. For program evaluation and assessment, it means adapting existing study methods that measure social returns to innovation in ways that explicitly capture spillover effects. This paper is based on a study that I performed for the ATP, Economic Analysis of Research Spillovers: Implications for the Advanced Technology Program, NIST GCR 97-708. I have benefited from comments and useful discussions with Zvi Griliches, Jeanne Powell, Rosalie Ruegg, and Richard Spivack. Some of the ideas in this paper grew out of previous joint research with James Adams. The views expressed herein are my own, however, and should not be attributed to any of these individuals or to the ATP.