Innovation and Incentives: Evidence from Corporate R&D
Harvard Business School
Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER)
Review of Economics and Statistics, Forthcoming
Beginning in the late 1980s, American corporations began increasingly linking the compensation of central research personnel to the economic objectives of the corporation. This paper examines the impact of the shifting compensation of the heads of corporate research and development. Among firms with centralized R&D organizations, a clear relationship emerges: more long-term incentives (e.g. stock options and restricted stock) are associated with more heavily cited patents. These incentives also appear to be associated with more patent filings and patents of greater originality. Short-term incentives appear to be unrelated to measures of innovation.
Number of Pages in PDF File: 35
Keywords: research and development, laboratory, compensation
JEL Classification: 03, J3Accepted Paper Series
Date posted: January 10, 2006
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