Reexamining knowledge spillovers: An auto-industry project reveals the range of benefits government-supported R and D can provide to smaller firms

More than most economic activities, innovation and technological change depend on new knowledge. Economists and other social scientists have demonstrated that the research and development activities of private firms generate widespread benefits to consumers and society at large. The overall economic value to society often exceeds the economic benefits of the innovating firms and is described by economists as spillovers. Knowledge spillovers occur when knowledge created by one company or industry is not contained within that company or industry and thereby creates value for others. Government programs that involve the intermingling of government and private-sector funds as well as personnel will always raise questions about the methods and extent of appropriate government participation. This article examines a government-industry supported project that was effective and successful at creating knowledge spillovers.