A BRIEF HISTORY of the U.S. Federal Government and Innovation: From Independence to World War I (1787 – 1917). Key takeaways:

[T]he government can be most effective when it intervenes in areas where innovation is needed but the risk for any individual entrepreneur to invest in the research and development would be too great.

[U]nder proper conditions the results of this government investment can benefit society well beyond its original narrow goals.

Modern examples abound. The best is likely geosynchronous communications satellites, first proposed by Arthur C. Clarke in 1945. Earth observation satellites are a close second, and I suspect GPS and manned spaceflight will soon be fully commercialized now that the risk has been reduced and the economic benefits are established (being established for manned space).