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Yves right here. We now have often amplified the findings of Marianna Mazzucato’s seminal work, The Entrepreneurial State. She documented how the US funded primary analysis throughout many universities and fostered inventive collaboration with enterprise. That, opposite to ideology, made authorities, and never the non-public sector, the chief in innovation by often taking dangers on elementary investigation that corporations had been unable or unwilling to take.
The research under supplies a brand new layer to this basic image. It exhibits that publicly funded patents that wind up being privately owned are disproportionately productive.
By Andrea Gazzani, Senior Economist Financial institution Of Italy, Joseba Martinez, Assistant Professor of Economics London Enterprise College, Filippo Natoli, Senior Economist Financial institution Of Italy, and Paolo Surico, Professor of Economics London Enterprise College. Initially revealed at VoxEU
The US has lengthy been the world’s innovation powerhouse, based mostly on a system that mixes public funding with non-public initiative. But this mannequin is below pressure. Utilizing newly digitised US patent knowledge since 1950, this column exhibits that publicly funded however privately owned patents – simply 2% of all US patents – account for round 20% of medium-term fluctuations in productiveness and GDP progress. As funding cuts threaten the most efficient funders of public R&D, the authors argue that America’s innovation edge rests on the seen hand of public help for primary analysis.
The US has lengthy been the world’s innovation powerhouse. From semiconductors to the web, from biotechnology to synthetic intelligence, America’s scientific management has rested on an ecosystem that mixes public funding with non-public initiative. But this mannequin is below pressure. Current debates over proposed funds cuts to the Nationwide Institutes of Well being (NIH) and the Nationwide Science Basis (NSF) come at a time when different economies — notably China and the EU — are rising public funding in frontier applied sciences. These shifts have reignited a central query: how a lot of America’s innovation edge depends upon public cash?
In a brand new paper (Gazzani et al. 2025), we offer recent empirical proof on the macroeconomic impression of the post-war American innovation mannequin — the one first envisioned by Vannevar Bush in Science, the Infinite Frontier (1945). Utilizing newly digitised US patent knowledge that distinguish funding sources and possession buildings, we present that government-funded however privately owned patents — simply 2% of all patents — account for roughly 20% of medium-term fluctuations in US productiveness and GDP progress. These public–non-public improvements additionally crowd in non-public R&D and funding, underscoring the outsized returns to authorities help for primary analysis.
Our findings counsel that the US owes a lot of its technological dynamism to not the invisible hand of the market alone, however to what could be referred to as the seen hand of government-enabled innovation.
The International Race for Innovation Management
The US authorities’s function in shaping technological progress is commonly taken with no consideration. However within the present coverage local weather, the place deficit issues dominate, public analysis funding faces renewed scrutiny. The NIH and NSF — central pillars of American science for the reason that Nineteen Fifties — are below strain at the same time as China channels huge state assets into synthetic intelligence, quantum computing, and inexperienced applied sciences. The EU, too, has expanded its Horizon Europe programme and nationwide innovation funds to deal with its lagging productiveness progress (see Aghion 2024, Bloom et al. 2019).
This isn’t the primary time such a rigidity has surfaced. As argued by Mazzucato (2013), authorities companies have lengthy been the ‘entrepreneurial state’, de-risking the basic analysis that non-public companies later commercialise. Current analysis has examined this theme from varied angles — from the macroeconomic results of public R&D (Fieldhouse and Mertens 2023) to the connection between fiscal coverage in a high-debt setting and productiveness progress (Fornaro and Wolf 2025). Our work enhances this line of analysis by tracing, on the combination stage, how completely different types of private and non-private innovation have formed US productiveness dynamics over the previous seven a long time.
Mapping America’s Innovation Structure
Following Bush’s blueprint, post-war US innovation has been constructed on three pillars:
- Authorities funding for areas of public curiosity
- Universities and analysis institutes to conduct elementary analysis
- Personal companies to commercialise the ensuing information.
Utilizing the Authorities Patent Register database (Gross and Sampat 2025), we classify all US patents granted since 1950 into three teams:
- Public–non-public (funded by authorities, owned by a non-public entity)
- Personal–non-public (absolutely privately funded and owned)
- Public–public (funded and owned by the federal government)
We then hyperlink these time sequence to macroeconomic indicators comparable to whole issue productiveness (TFP), GDP, R&D expenditure, and funding. By controlling for the enterprise cycle and exhibiting that our innovation measures aren’t predicted by fiscal and financial shocks, we isolate the medium-term co-movements between innovation exercise and combination outcomes.
The outcomes are hanging. Determine 1 shows the macroeconomic results of innovation, exhibiting that public-private patents (first column) are characterised by the most important medium-term impression on each output (first row) and productiveness (second row), doubling these of personal sector improvements over the identical horizons (second column). Authorities-funded however privately owned patents are additionally related to sustained will increase in non-public R&D spending, enterprise funding, and actual wages. Although public–non-public patents make up simply 2% of the entire, they account for about one-fifth of medium-term GDP and TFP fluctuations (Determine 2). Innovation by public–public patents, not proven right here, has muted common results — although it disproportionately options essentially the most disruptive breakthroughs in well being and biotechnology. These outcomes maintain throughout ten completely different econometric approaches, persistently pointing to government-funded analysis as a key driver of medium-term productiveness beneficial properties.
Determine 1 Macroeconomic results of innovation
Notes: The determine shows the dynamic results of innovation shocks in every class of patents (public-private, private-private, public-public; by column) on (log) actual per-capita non-public GDP and (log) TFP. The estimates are executed via native projections, the place the dimensions of the shock is normalised comparable to to extend whole patents by 1% on impression. Shaded areas report 68% and 90% confidence intervals. Pattern: 1950:Q1-2015:This autumn.
Determine 2 Contribution of innovation to GDP and TFP
Observe: The determine shows the forecast error variance contribution of innovation shocks in two classes of patents (public-private and private-private) on (log) actual per-capita GDP expenditure and (log) TFP (by row). Shaded areas report 68% and 90% confidence intervals.
Why are government-funded patents so impactful? As a result of they are typically extra primary than privately funded ones. Primary analysis expands the information frontier, producing broadly relevant insights that create highly effective spillovers and amplify innovation throughout the economic system. Determine 3 exhibits that government-funded patents account for a big share of the ‘most elementary’ ones, in keeping with measures of basicness based mostly on patents’ similarity to subsequent ones (‘significance’) and on the variety of citations to scientific papers (‘reliance on science’). Though they’re far fewer, government-funded patents are typically way more primary than non-public ones.
Determine 3 Basicness of publicly funded patents
The Multiplier of Public–Personal Innovation
The macroeconomic patterns we uncover echo Vannevar Bush’s post-war imaginative and prescient: the federal government ought to fund primary analysis that non-public buyers discover too dangerous or with too giant upfront prices, whereas universities and companies translate discoveries into functions. This collaboration between public funding and personal possession seems to generate highly effective spillovers.
A back-of-the-envelope calculation means that each greenback of public R&D funding generates between eight and fourteen {dollars} in cumulative GDP, greater than twice the return on privately financed innovation. These multipliers align with current proof that public R&D crowds in — fairly than crowds out — non-public innovation (see Bloom et al. 2019, Myers and Lanahan 2022, Bergeaud et al. 2025).
NIH, NSF, and the Geography of Transformative Science
Drilling down by federal company, the NIH and NSF emerge as the most efficient funders of innovation. Patents supported by these two companies are most strongly linked to medium-term beneficial properties in productiveness, output, and business-sector R&D. In contrast, patents financed by the Division of Protection or NASA exhibit smaller macroeconomic correlations.
The sectoral composition of improvements sheds additional gentle on why. In well being and biotechnology — fields dominated by NIH funding — publicly financed patents outperform non-public ones by a large margin. This displays each the ‘public good’ nature of biomedical analysis and the lengthy horizon of medical discovery, which non-public companies could discover onerous to justify to shareholders. Related patterns come up in primary vitality analysis, the place the Division of Power’s publicly funded tasks have generated vital spillovers into non-public R&D, in keeping with proof in Myers and Lanahan (2022).
Who Delivers the Largest Influence?
Past federal companies, the information reveal systematic variations throughout sorts of innovators. Analysis institutes and universities — fairly than for-profit corporations — produce essentially the most growth-enhancing patents when supported by authorities funds. When universities rely solely on non-public funding, nonetheless, their macroeconomic impression is roughly half as giant.
Amongst for-profit entities, start-ups and venture-capital-backed companies stand out as extra productive engines of innovation than established firms — however solely once they obtain public help. With out authorities funding, their productiveness benefit vanishes. These findings counsel that public financing doesn’t displace entrepreneurial exercise; it amplifies it.
Such complementarities between private and non-private sectors echo the arguments made by Aghion et al. (2023) and Mitra et al. (2024) on the design of innovation coverage in Europe: when the state takes early-stage dangers, the non-public sector is extra prone to scale up transformative applied sciences. America’s post-war expertise affords a textbook instance of this dynamic.
The Macroeconomics of Innovation Coverage
The combination correlations we doc are giant sufficient to clarify a few of the key swings in US productiveness progress for the reason that Nineteen Fifties. Surges in public–non-public innovation coincide with the ‘affluent’ Nineteen Fifties, the ‘roaring’ Nineteen Nineties, and the productiveness slowdown of the 2000s. Had government-funded innovation throughout the 2000s remained at its Nineteen Nineties tempo, whole issue productiveness in 2007 would have been 5–10% larger than it really was.
This underscores an often-overlooked side of innovation coverage: its macroeconomic externalities. When fiscal tightening or funds cuts cut back public analysis spending, the impression extends nicely past the lab. It dampens non-public R&D, slows productiveness progress, and finally lowers potential output. Conversely, strategic funding in science can function a medium-term stabiliser — a discovering in keeping with the fiscal-growth literature on ‘productive authorities spending’ (Antolin-Diaz and Surico 2025, Fornaro and Wolf 2025).
Coverage Classes
Our findings level to 3 key classes for policymakers:
- Defend public analysis budgets. Reducing funding for NIH and NSF could ship short-term financial savings, however dangers undermining the long-run engine of US productiveness and world competitiveness.
- Leverage public–non-public complementarities. Essentially the most highly effective improvements come up when authorities funds elementary analysis, and personal actors translate it into functions. Coverage ought to proceed to encourage this division of labour.
- Spend money on primary science. Analysis institutes and universities generate the best macroeconomic returns per greenback of public help, particularly in well being, vitality, and rising applied sciences.
At a time when the US faces mounting competitors from state-driven innovation fashions overseas, the proof from seven a long time of knowledge is unambiguous: America’s technological management is itself a public achievement. As Vannevar Bush warned in 1945, “Business will rise to the problem of making use of new information — however primary analysis is actually non-commercial in nature. It won’t obtain the eye it requires if left to trade.”
Authors’ be aware: This column doesn’t essentially mirror the views of the Financial institution of Italy or the European System of Central Banks.
See authentic publish for references
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