Abstract
Despite their magnitude and potential impact, federal R&D expenditures outside of research universities have attracted little economic scrutiny. We examine the initiatives since 1980 to encourage patenting and technology transfer at the national laboratories. Both field and empirical research challenges the conventional picture of bleak failure. The policy changes had a substantial impact on the laboratories' patenting: they have gradually reached parity in patents per R&D dollar with research universities. Unlike universities, laboratory patent quality has remained constant or even increased despite this growth. Success is associated with avoiding technological diversification and with having a university as lab manager.