Can Politicians Speed Up Long-Term Technological Change? Some Thoughts from a Comparison of the German and US-American Synthetic Rubber Programs Before, During and After World War II

Abstract

I investigated the effect of government demand on firms’ innovation activities comparing the German and American synthetic rubber industries before, during and after World War II. I obtained three main results. 1. Because of the low price of natural rubber, price and sales guarantees were needed to motivate firms to produce the synthetic rubber BUNA S. 2. Facing fixed prices I.G. Farben improved their efficiency more than the American firms working under cost plus contracts. 3. The patent sharing agreement of the American synthetic rubber program caused firms to hold back advanced synthetic rubber inventions.