Title page 1

Contents 2

Abstract 1

1. Introduction 3

2. How US military procurement has changed to improve access for new firms 5

2.1. The Defense Innovation Unit (DIU) 6

3. Data collection and descriptive statistics 8

4. Data matching 11

5. Regression methodology: difference-in-difference with staggered adoption time 14

6. Empirical results 16

7. Robustness checks 18

8. Conclusions 20

References 20

Annex 23

Table 1. Absolute SMD between treated and untreated firms 10

Table 2. Data on treated group and matched untreated 13

Table 3. Effects of the DIU, never-treated firms in control 17

Figure 1. Number of proposals received by the DIU 7

Figure 2. Number of products published in the DIU's catalogue by technological area 8

Figure 3. Location of treated and untreated DoD vendors by US metropolitan area 11

Figure 4. Absolute SMD before and after propensity score matching 12

Figure 5. Dynamic effects of the augmented specification, awarded contracts 18

Table 1. Support by event time in the baseline specification 23

Table 2. Effects of the DIU, never treated firms in control 23

Table 3. Effects of the DIU, never-treated firms in control 24

Table 4. Dynamic effects of the DIU 24

Table 5. Time placebo tests for short-run effects on awarded contracts 25

Table 6. Alternative specifications 25

Table 7. Effects of the DIU across periods excluding SBIR-treated firms 25

Table 8. Robustness to alternative patent-based measures of firms' innovative profiles 26

Figure A1. Distribution of unit-placebo tests, intensive margin of DoD awarded contracts 27

Figure A2. Distribution of unit-placebo tests, extensive margin of awarded contracts 27

Figure A3. Leave-one-out replications, baseline specification 28

Figure A4. Leave-one-out replications, augmented specification 28