day3.0 josh(gov-ent) - amoon.world🌙

<svg viewBox="0 0 1200 900" xmlns="http://www.w3.org/2000/svg">  <rect width="1200" height="900" fill="#f3f4f6"/>  <rect x="0" y="0" width="1200" height="80" fill="#1e3a8a"/> <text x="600" y="50" font-family="Arial, sans-serif" font-size="24" font-weight="bold" text-anchor="middle" fill="white"> Government & Entrepreneurship: When Policy Meets Innovation </text> <text x="600" y="70" font-family="Arial, sans-serif" font-size="16" text-anchor="middle" fill="#93c5fd"> Josh Lerner - MIT Entrepreneurship Bootcamp Day 3 </text>  <rect x="20" y="100" width="560" height="380" rx="10" fill="white" stroke="#e5e7eb" stroke-width="2"/> <text x="300" y="130" font-family="Arial, sans-serif" font-size="18" font-weight="bold" text-anchor="middle" fill="#1e3a8a"> 🎯 Key Concepts Q&A </text>  <g font-family="Arial, sans-serif" font-size="14">  <text x="40" y="160" font-weight="bold" fill="#4b5563">Topic</text> <text x="200" y="160" font-weight="bold" fill="#4b5563">Core Question</text> <text x="420" y="160" font-weight="bold" fill="#4b5563">Key Insight</text>  <line x1="30" y1="170" x2="570" y2="170" stroke="#e5e7eb"/> <text x="40" y="190" fill="#374151">R&D Funding</text> <text x="200" y="190" fill="#374151">How to optimize?</text> <text x="420" y="190" fill="#374151">Balance crowd-out</text>  <line x1="30" y1="205" x2="570" y2="205" stroke="#e5e7eb"/> <text x="40" y="225" fill="#374151">SBIR Impact</text> <text x="200" y="225" fill="#374151">Does it work?</text> <text x="420" y="225" fill="#374151">2x VC funding odds</text>  <line x1="30" y1="240" x2="570" y2="240" stroke="#e5e7eb"/> <text x="40" y="260" fill="#374151">NIH Research</text> <text x="200" y="260" fill="#374151">Private impact?</text> <text x="420" y="260" fill="#374151">$1→$2.34 private R&D</text>  <line x1="30" y1="275" x2="570" y2="275" stroke="#e5e7eb"/> <text x="40" y="295" fill="#374151">Long Research</text> <text x="200" y="295" fill="#374151">Market failure?</text> <text x="420" y="295" fill="#374151">Missing cancer drugs</text>  <line x1="30" y1="310" x2="570" y2="310" stroke="#e5e7eb"/> <text x="40" y="330" fill="#374151">Immigration</text> <text x="200" y="330" fill="#374151">H-1B effect?</text> <text x="420" y="330" fill="#374151">Less entrepreneurship</text>  <line x1="30" y1="345" x2="570" y2="345" stroke="#e5e7eb"/> <text x="40" y="365" fill="#374151">Defense R&D</text> <text x="200" y="365" fill="#374151">Open vs closed?</text> <text x="420" y="365" fill="#374151">+30% quality if open</text> </g>  <rect x="600" y="100" width="580" height="380" rx="10" fill="white" stroke="#e5e7eb" stroke-width="2"/> <text x="890" y="130" font-family="Arial, sans-serif" font-size="18" font-weight="bold" text-anchor="middle" fill="#1e3a8a"> 💡 Core Problem → Solution </text>  <rect x="620" y="160" width="250" height="140" rx="8" fill="#e9d5ff" stroke="#9333ea" stroke-width="2"/> <text x="745" y="190" font-family="Arial, sans-serif" font-size="16" font-weight="bold" text-anchor="middle" fill="#581c87"> 💜 PROBLEM </text> <text x="745" y="215" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#581c87"> Market failures in innovation: </text> <text x="745" y="235" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#581c87"> • Spillovers uncaptured </text> <text x="745" y="255" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#581c87"> • Long-term underinvest </text> <text x="745" y="275" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#581c87"> • Coordination failures </text>  <path d="M 870 230 L 910 230" stroke="#6b7280" stroke-width="3" fill="none" marker-end="url(#arrowhead)"/> <defs> <marker id="arrowhead" markerWidth="10" markerHeight="10" refX="9" refY="3" orient="auto"> <polygon points="0 0, 10 3, 0 6" fill="#6b7280"/> </marker> </defs>  <rect x="910" y="160" width="250" height="140" rx="8" fill="#d1fae5" stroke="#10b981" stroke-width="2"/> <text x="1035" y="190" font-family="Arial, sans-serif" font-size="16" font-weight="bold" text-anchor="middle" fill="#064e3b"> 💚 SOLUTION </text> <text x="1035" y="215" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#064e3b"> Smart gov intervention: </text> <text x="1035" y="235" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#064e3b"> • Mechanism design </text> <text x="1035" y="255" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#064e3b"> • Complement private </text> <text x="1035" y="275" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#064e3b"> • Address spillovers </text>  <rect x="620" y="320" width="540" height="140" rx="8" fill="#fef3c7" stroke="#f59e0b" stroke-width="2"/> <text x="890" y="350" font-family="Arial, sans-serif" font-size="16" font-weight="bold" text-anchor="middle" fill="#78350f"> ⚖️ The Government Intervention Tradeoff </text> <g font-family="Arial, sans-serif" font-size="14">  <text x="720" y="380" text-anchor="middle" font-weight="bold" fill="#78350f">Direct Support</text> <text x="720" y="400" text-anchor="middle" fill="#92400e">✓ Address market failure</text> <text x="720" y="420" text-anchor="middle" fill="#92400e">✓ Support basic research</text> <text x="720" y="440" text-anchor="middle" fill="#dc2626">✗ Crowding out risk</text>  <text x="890" y="410" text-anchor="middle" font-size="20" fill="#78350f">↔</text>  <text x="1060" y="380" text-anchor="middle" font-weight="bold" fill="#78350f">Market Forces</text> <text x="1060" y="400" text-anchor="middle" fill="#92400e">✓ Efficient allocation</text> <text x="1060" y="420" text-anchor="middle" fill="#92400e">✓ No distortions</text> <text x="1060" y="440" text-anchor="middle" fill="#dc2626">✗ Underinvestment</text> </g>  <rect x="20" y="500" width="560" height="280" rx="10" fill="white" stroke="#e5e7eb" stroke-width="2"/> <text x="300" y="530" font-family="Arial, sans-serif" font-size="18" font-weight="bold" text-anchor="middle" fill="#1e3a8a"> 🛠️ Action Items for Policymakers </text> <g font-family="Arial, sans-serif" font-size="14">  <circle cx="50" cy="560" r="4" fill="#10b981"/> <text x="70" y="565" font-weight="bold" fill="#374151">Design to complement, not replace private R&D</text> <text x="70" y="585" fill="#6b7280">Why: Crowding out destroys value</text> <text x="70" y="605" fill="#6b7280">Start: Map private sector gaps</text>  <circle cx="50" cy="630" r="4" fill="#10b981"/> <text x="70" y="635" font-weight="bold" fill="#374151">Target spillover-heavy research areas</text> <text x="70" y="655" fill="#6b7280">Why: Markets underinvest where benefits spread</text> <text x="70" y="675" fill="#6b7280">Start: Measure spillover coefficients</text>  <circle cx="50" cy="700" r="4" fill="#10b981"/> <text x="70" y="705" font-weight="bold" fill="#374151">Create evaluation mechanisms upfront</text> <text x="70" y="725" fill="#6b7280">Why: Need causal evidence of impact</text> <text x="70" y="745" fill="#6b7280">Start: Build in natural experiments</text> </g>  <rect x="600" y="500" width="580" height="280" rx="10" fill="white" stroke="#e5e7eb" stroke-width="2"/> <text x="890" y="530" font-family="Arial, sans-serif" font-size="18" font-weight="bold" text-anchor="middle" fill="#1e3a8a"> 📊 Reading List Classification (MECE) </text>  <g>  <rect x="700" y="660" width="80" height="60" fill="#a855f7"/>  <rect x="800" y="630" width="80" height="90" fill="#10b981"/>  <rect x="900" y="570" width="80" height="150" fill="#f59e0b"/>  <rect x="1000" y="720" width="80" height="0" fill="#ef4444"/>   <text x="740" y="650" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#374151">🟣 20%</text> <text x="840" y="620" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#374151">♻️ 30%</text> <text x="940" y="560" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#374151">🟧 50%</text> <text x="1040" y="710" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#374151">🔴 0%</text>  <text x="740" y="740" font-family="Arial, sans-serif" font-size="12" text-anchor="middle" fill="#374151">Anomaly</text> <text x="840" y="740" font-family="Arial, sans-serif" font-size="12" text-anchor="middle" fill="#374151">Definition</text> <text x="940" y="740" font-family="Arial, sans-serif" font-size="12" text-anchor="middle" fill="#374151">Generation</text> <text x="1040" y="740" font-family="Arial, sans-serif" font-size="12" text-anchor="middle" fill="#374151">Conception</text> </g>  <text x="890" y="580" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" font-weight="bold" fill="#374151"> Key Finding: 0% frameworks - need integrative theory of gov role </text>  <rect x="0" y="800" width="1200" height="100" fill="#1e3a8a"/> <text x="600" y="830" font-family="Arial, sans-serif" font-size="16" font-weight="bold" text-anchor="middle" fill="white"> 3 Key Takeaways </text> <text x="200" y="860" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#dbeafe"> 1. Government can catalyze innovation </text> <text x="200" y="880" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#dbeafe"> when designed to complement markets </text> <text x="600" y="860" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#dbeafe"> 2. Unintended consequences abound: </text> <text x="600" y="880" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#dbeafe"> H-1B reduces entrepreneurship </text> <text x="1000" y="860" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#dbeafe"> 3. Rigorous evaluation essential: </text> <text x="1000" y="880" font-family="Arial, sans-serif" font-size="14" text-anchor="middle" fill="#dbeafe"> natural experiments reveal truth </text> </svg> # Day 3.0 - Josh Lerner (Harvard Business School) ## Government and Entrepreneurship 🟣A: Papers that identify puzzles, paradoxes, or problems in entrepreneurship ♻️D: Papers that define challenges or establish needs without providing solutions 🟧G: Papers that generate solutions through models, methods, or mechanisms 🔴C: Papers that conceive new theoretical frameworks or paradigms ## Theory Papers ### ♻️ D: Papers that Define Challenges - **Bolton, P., Liu, S., Nanda, R., & Sunderesan, S. (2024).** Moral hazard in experiment design: Implications for financing innovation. _Unpublished manuscript_. - **The Challenge Defined**: When entrepreneurs control experimentation, they may choose designs that look good to investors rather than generate real learning. The paper frames this moral hazard problem without providing a complete solution mechanism. ### 🟧 G: Papers that Generate Solutions - **Lach, S., Neeman, Z., & Schankerman, M. (2021).** Government financing of R&D: A mechanism design approach. _American Economic Journal: Microeconomics_, 13, 238–272. - **The Solution Mechanism**: Develops an optimal mechanism for government R&D support that uses a scoring auction to balance innovation incentives with minimizing deadweight loss. The model solves for subsidy levels and allocation rules. --- ## Empirical Papers ### 🟣 A: Papers that Identify Anomalies _(These reveal puzzling patterns in government-entrepreneur interactions)_ - **Budish, E., Roin, B., & Williams, H. (2015).** Do firms underinvest in long-term research? Evidence from cancer clinical trials. _American Economic Review_, 105(7), 2044–2085. - **The Paradox**: Cancer drugs requiring longer trials see dramatically less R&D investment despite potentially huge social value. Market incentives lead to missing drugs for cancers that could be treated but require lengthy development. - **Dimmock, S. G., Huang, J., & Weisbenner, S. J. (2022).** Give Me Your Tired, Your Poor, Your High-Skilled Labor: H-1B Lottery Outcomes and Entrepreneurial Success. _Management Science_, 68, 6950–6970. - **The Anomaly**: H-1B lottery winners are LESS likely to start companies than losers who must find alternative visas. The supposedly pro-innovation visa actually discourages entrepreneurship by providing a comfortable employment path. ### ♻️ D: Papers that Frame Challenges _(These establish important problems without complete solutions)_ - **Bai, J., Bernstein, S., Dev, A., & Lerner, J. (2022).** The dance between government and private investors: Public entrepreneurial finance around the globe. _NBER Working Paper No. 28744_. - **The Global Challenge**: Documents how government investment in entrepreneurship varies 100-fold across countries and must adapt to local private capital markets. Maps the coordination challenge without prescribing universal solutions. - **Myers, K., & Lanahan, L. (2022).** Estimating spillovers from publicly funded R&D: Evidence from the US Department of Energy. _American Economic Review_, 112(7), 2393–2423. - **The Measurement Challenge**: Shows knowledge spillovers from DOE research are 3x direct effects but concentrated geographically. Establishes the need to account for spillovers in R&D policy without providing an optimization framework. ### 🟧 G: Papers that Generate Solutions _(These provide rigorous methods or causal estimates)_ - **Howell, S. (2017).** Financing innovation: Evidence from R&D grants. _American Economic Review_, 107(4), 1136–1164. - **The Identification Method**: Uses quasi-random variation in SBIR grant decisions to show causal effects—doubling firm's chance of receiving VC funding and increasing patenting by 50%. Solves the selection problem in measuring grant effectiveness. - **Azoulay, P., Graff-Zivin, J., Li, D., & Sampat, B. (2019).** Public R&D investments and private sector patenting: Evidence from NIH funding rules. _Review of Economic Studies_, 86, 117–152. - **The Measurement Engine**: Exploits NIH funding windfalls to specific disease areas to trace how public research translates to private patents. Shows $1 of NIH funding generates $2.34 in pharmaceutical firm R&D. - **Howell, S. T., Rathje, J., Van Reenen, J., & Wong, J. (2024).** Opening up military innovation: Causal effects of reforms to US defense research. _NBER Working Paper No. 28700_. - **The Natural Experiment**: Uses staggered reforms opening defense research to academics as identification. Shows openness increases research quality by 30% and doubles commercial spillovers without compromising military applications. --- ## Key Insights from Classification ### Distribution Analysis - **2 Anomaly papers (🟣)**: Reveal counterintuitive government effects - **3 Definition papers (♻️)**: Frame coordination and measurement challenges - **5 Solution papers (🟧)**: Provide causal estimates and optimal mechanisms - **0 Framework papers (🔴)**: No paradigm-shifting conceptual contributions ### Missing Elements The absence of 🔴 (Framework) papers suggests an opportunity for: - Unified theory of government's role in entrepreneurial ecosystems - New conceptual models bridging public and private innovation - Frameworks that reconceptualize the state-entrepreneur relationship ### Comparative Strengths - **Theory-Empirics Balance**: Only 2 theory papers vs 8 empirical—heavily tilted toward evidence - **Methods Focus**: 5 of 10 papers (50%) are 🟧 solutions, showing emphasis on rigorous causal identification - **Problem Identification**: Both 🟣 papers reveal government interventions backfiring—important for policy ### Research Implications The classification reveals government-entrepreneurship research excels at: 1. **Rigorous evaluation** of specific programs (🟧 strength) 2. **Documenting challenges** in public-private coordination (♻️ emerging) 3. **Finding unintended consequences** of well-meaning policies (🟣 critical) But lacks: 1. **Integrative frameworks** explaining when/how government should intervene (🔴 gap) 2. **Theory** relative to empirics (only 20% theory papers) This suggests the field is ready for synthesizing frameworks that integrate the rich empirical findings into actionable theory for policymakers. ---- [[2025-07-17|25-07-17-09]] # MANUSAL NOTE why government social >> private return don't match why should gov be involved - kwldg spillovers capital constraints - esp. for smaller companies, less tangilbes (stiglets; capital rationing) endogenous entrepreneurs (statistical discrimination) supply of entrepreneurs change -> lead in (increasing return) government intervention - copper, shell gas, coal gov leapfrog to 21c - biotech (queensland) at the layouts (good idea) - sidney not in brids band (austrian vc and patent lawyers) - great ideas were doing lack of virtuous cycle university (change attitude is one of their peers widely successful); supply is endogenous - increasing return pairs of village in india - i'm new to public policy domain but would like to learn more, but to justify government intervention, is government (social return, increasing scale) enough? might some require but fundamental challenges - incompetence : policy makers decide to do things summarize the logic of "government should intervene" - alternatives 1. social but challeng --- ### Summary of Government Intervention in Entrepreneurship | Category | Rationale / Framework | Key Details & Critical Questions | | :------------------------------- | :-------------------------------------------------- | :------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | | **Reasons for Government Help** | **A. Good Ideas Spread (Knowledge Spillovers)** | • An entrepreneur's idea benefits all of society, but they can't capture the full profit. • Private investors are unwilling to fund it due to low private returns. • Government steps in because a successful business boosts the whole economy (jobs, taxes). | | | **B. Banks Fear New Ideas (Information Asymmetry)** | • Investors struggle to evaluate the risk of brand-new ventures. • This leads to funding gaps, especially for women and minority entrepreneurs. • Government provides capital when the private market is too cautious. | | | **C. Success Creates More Success (Ecosystems)** | • One successful company helps others by creating a supportive environment (investors, lawyers, talent). • Seeing peers succeed encourages more people to become entrepreneurs. • Government can invest to build this critical mass and start a positive cycle. | | | **D. Keeping Talent at Home (Competitiveness)** | • Countries want to prevent "brain drain"—their best entrepreneurs leaving. • Government policies and funding can make it more attractive for startups to stay and grow locally. | | **How to Judge Government Help** | **Framework A: Is the Market Truly Broken?** | • **Identify the Problem:** Is it a genuine market failure or just an outcome we don't like? • **Compare Options:** Is it better to do nothing, change regulations, give direct funding, or partner with private firms? • **Assess Government Capability:** Does the government have the expertise to pick winners without political bias? | | | **Framework B: Are Benefits Worth the Costs?** | • **Consider the "What If":** What is the opportunity cost? What else could this money be used for? • **Add Up All Costs:** Include program funds, administrative overhead, and negative effects on private investment. • **Estimate All Benefits:** Include direct profits, spillover effects, and a stronger business community. | | | **Overall Key Questions for Analysis** | • **Additionality:** Is this funding something that wouldn't happen otherwise? • **Targeting:** Can we effectively identify the right businesses to support? • **Exit Strategy:** When and how does the government support end to avoid dependency? • **Better Alternatives:** Is this more effective than tax reform, education, or infrastructure spending? • **Scale:** How much intervention is too much? | To justify government intervention, 1. first show that a government intervening to ent is valuable on its own by proving its social benefits will outweigh its costs. 2. i think a robust justification might be comparing this program to other alternatives use of government's, arguing that it is the most effective use of limited public money and resources. marginal value of this problem (tax payer) - goal is more scientific medical paper (lives saved) - 10jobs targeting deficient market "public policy for ent?" second tief market - raffelle (different financing mechanism - all the levels boost entrepreneurship - NOT THERE YET) better way to frame is, "leap of faith" that entrepreneruship is needed going to hubs is better than spreading out RELATIVE MARGINAL RETURN [[2025-07-17|25-07-17-09]] ⭐️semiconductor 3b ; 50gallon -> 30k gallon tank (nonlinearity) npv of (RD stock and market capital firm) - GM,IBM, KODAK (market cap was lower than fd stock) articulating a problem (+ how to msr) is different from namradin narain - time frames associated with new ideas being developed - gestation lags (how long does it get for ideas to put into practice?) relevant with the topic of "who to fund", are you aware of any empirical evidence that the more founder thinks their idea quality is good, the less window dressing they do for funding? i don't know how to define and measure idea quality, but ⭐️It was more a sociology study, and then we'll sort of get back to SBIR, but where it was more like social psych, but where they were like doing questions like, What is the population of Mozambique? They did to entrepreneurs. And then similar MBAs weren't entrepreneurs. And basically, the entrepreneurs were no better at picking population of Mozambique than the others. They then they said, What are your air bands around that estimate? And the entrepreneurs were all like, our air ban is between 14 point 2,000,014 point 8 million, as opposed to between 20 million and 80 million, right? They were just incredibly overconfident in terms of, yeah, but I don't think I have not seen anything that tries to relate the overconfidence to success. # military innovation henry ford and steve jobs - unanticipated stuff mk; topdown: here's our problem set (competition of this element) bottomup: bigger, heavier Top-down vs. Bottom-up (problem first or solution first?) - Design of innovation incentives important Especially amid slowdown in productivity growth Decker et al. 2016, Syverson 2017 - Overlooked but crucial choice dimension in the search for ideas: - Centralized "top-down" approach soliciting a particular technology "bottom-up" " approach in which innovators suggest ideas - Bottom-up innovation policy - Reflects uncertainty about what opportunities exist - May be especially useful if, in a larger and more diverse economy, more difficult for technology-deploying institutions to find innovations - Jones 1995, Bloom et al. 2020 open topic reforms experiment with open topics in sbir in 2018, > let the flowers bloom - mao probability of tech adoption by rank around cutoff better ppl are participating is the success of open due to bottom up opneness or selection - control for covariates (fir age, size, narrow tech) even within zeros, seemingly working - characterize topic specifcity using ML on application -