My dissertation, Political Economy of Technological Advancement, examines the impact of political institutions on government Research and Development (R&D) policy and its implications.
Investments in innovation bear fruit after a significant time lag, which means that the incumbent that chose to make them is typically out of office by the time they emerge. Then what motivates an incumbent to adopt such policies? Moreover, unlike other long-term projects that are visible to the general public even before their completion (e.g., infrastructure construction or education reform), the implementation of pro-innovation policies is much less salient to the public. My research explores three possible mechanisms that explain the decision of the incumbent to pursue the policy of technological development: competence signaling, rent-seeking, and strengthening of the future coalitions.
The first part of my dissertation shows that while the results of R&D policy have not yet emerged, the policy decision to support innovation is visible to the public and sends the signal about the competence of the politician. Using survey experiments in the USA and Russia, I find that commitment of politicians to pro-innovation policies makes the respondents believe that the politician is more competent, compared to investment in other long-term projects. This result is consistent with patterns observed across OECD countries.
The second part of my dissertation documents how loopholes in R&D policies provide innovators with incentives for opportunism. I explore the underlying mechanisms using data on patenting in Russia and a difference-in-differences approach. I find that poor policies result in lower quality of patents by providing incentives to file low-quality patents. At the same time, they harm inventors that produce high-quality research, as an investment in innovation becomes riskier for firms. Latter leads to the unraveling of the market for technology. I provide the model that explains how such policies might be incentive-compatible for the incumbent that cares about the economic growth.
The third part of my dissertation focuses on the case when politicians face a trade-off between stifling economic growth and facing a threat of technological displacement by new economic elites. Contrary to conventional wisdom, it shows that investing in innovation can be strategically safe if companies with political connections have more incentives to co-invest effort in the R&D project relative to unconnected ones. This theory implies three observable implications: governments will distribute cost-reducing grants to both connected and unconnected companies; connected companies will show a larger effect of R&D grant support on economic performance; and during the assessment period of R&D projects, government contracts will preferentially support connected companies. Analyzing evidence from a cost-reducing R&D support program in Russia, a trajectory-balancing approach produces results consistent with each of these implications.
Parts of this project have been published in the following forms:
Parts of this project currently under review: