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Investigates empirically the degree to which federal R&D displaces private R&D. The analysis is based on a sample of 174 manufacturing firms. It is found 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.
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Higgins et al. (1981) studied this question.
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