Venture Capital and Strategic Investment for Developing Government Mission Capabilities

The Chief of the Research and Engineering Division at the Joint Improvised Explosive Device Defeat Organization JIEDDO asked RAND to review previous experience with U.S. government-sponsored venture capital initiatives, and the ways they developed mission-oriented capabilities. In particular, he was interested in understanding how they were organized and how they operated, and whether and how they influenced private-sector actors to adapt their innovations for government purposes. In response to this request, RAND performed a two-pronged analysis of government venture capital and strategic investment methods. One track examined the practical experience of three prominent government venture capitalstrategic investment initiatives. The second track created a game-theoretic model to explain the balance of selected economic incentives that such initiatives can use to spur innovation. The microeconomic analysis of the second track helps to shed light on the differences observed in the examples of the first track, and it lays an analysis foundation that can be used to structure and manage elements of future initiatives.