Government funding and firms’ non-funded innovation trajectory

Government funded innovation has received increasing attention in organisational research as reflected in scholars’ interest in the R&D consequences or the enhanced public benefits resulted from such innovation. Although government funding is an important theme in public–private collaborations, it is unclear how funded firms – that is, organisations operating in the private sector while funded by the government to perform R&D – would strategically respond to government funding in their own learning behaviour. This paper develops a theoretical framework to explain how the engagement in government funded innovation may prompt the funded firms to pursue exploitation and exploration simultaneously in their non-funded innovation portfolio. Analyses of US patent data support the argument that the funded firms may dig deeper into the funded knowledge area for innovation inputs and search wider in technological domains as their innovation outputs. The paper illustrates the potential of connecting the literatures of organisational learning and public–private partnerships.