THE ECONOMIC IMPACTS OF GOVERNMENT RESEARCH AND PROCUREMENT: THE SEMICONDUCTOR EXPERIENCE

This thesis assesses the economic impact of government research and procurement on the semiconductor industry. Two main lines of inquiry are pursued. The first involves the development of a general conceptual framework for analyzing the impacts of research and procurement policy on commercial R&D, productivity, and competition, and the application of this framework to assess the history of government research and procurement in the semiconductor industry. The framework derives from a review of the relevant economic literature on the determinants of the level and direction of private R&D activity. The link between public policy and commercial productivity is hypothesized to operate primarily through the spillover to the private sector of technological knowledge, skills, and concepts, which serve to increase the productivity of commercial R&D.;The second line of inquiry pursued in this thesis involves the development of an empirical model of the effects of research and procurement policy on productivity and market share growth, as well as the estimation of this model using data from the semiconductor industry. The model is derived from the tradition of "econometric production function" models used to estimate the link between R&D and productivity. The effects of government research and procurement are represented within the model as knowledge spillovers that influence the value of the stock of technological knowledge held by a firm. These knowledge spillovers enter the specification of the model in such a way as to reflect the assumption that government research and procurement influence productivity interactively by increasing the productivity of commercial R&D.