Working Paper: NBER ID: w9727
Authors: Saul Lach; Mark Schankerman
Abstract: We show that economic incentives affect the number and commercial value of inventions generated in universities. Using panel data for 102 U.S. universities during the period 1991-1999, we find that universities which give higher royalty shares to academic scientists generate more inventions and higher license income, controlling for other factors including university size, quality, research funding and technology licensing inputs. The incentive effects are much larger in private universities than in public ones. For private institutions there is a Laffer curve effect: raising the inventor's royalty share increases the license income retained by the university. The incentive effect appears to work both through the level of effort and sorting of academic scientists.
Keywords: economic incentives; university inventions; royalty sharing; technology licensing
JEL Codes: O31; O34; L3; L0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in the inventor's share of royalties (O39) | increase in total revenues from licensed inventions (O39) |
| higher royalty shares to academic scientists (O34) | generate more inventions (O31) |
| higher royalty shares to academic scientists (D33) | higher license income (D45) |
| higher royalty shares (D33) | stronger incentive effect in private universities (D29) |
| increase in the inventor's royalty share (O39) | higher license income retained by the university (D45) |
| incentive effects (M52) | increased effort by inventors (O39) |
| incentive effects (M52) | sorting of more productive scientists into institutions offering higher royalty shares (D29) |
| higher royalty shares (D33) | greater license income (D45) |
| incentive effects (M52) | quality of inventions (O31) |