Federal support of technological growth in industry: Some evidence of crowding out

The purpose of this paper is to investigate empirically the degree to which federal R&D displaces private R&D. The analysis is based on a sample of 174 manufacturing firms. We find that the firm's allocation of its R&D expenditures is not independent of the amount of federal funds it receives. Specifically, federal research subsidies displace existing research activities in favor of additional development projects.