And, even for railroads, external financing came primarily from private domestic or foreign sources; estimates place the proportion of government funding in nominal investment by railroad companies at less than 10 percent after the Civil War.47 In the United States, the government has contributed most effectively to technological change by promoting an economic, financial, and legal environment that is conducive to innovation and to the diffusion of new technologies.
Federal funding of basic research, often in research universities or federal laboratories, obviously comprises an important part of this contribution. However, another key component of this environment has been the protection of intellectual property rights.