Incentivizing effort allocation through resource allocation: Evidence from scientists’ response to changes in funding policy

Forthcoming in Organization Science

71 Pages Posted: 28 Feb 2017 Last revised: 29 Oct 2021

See all articles by Michael Blomfield

Michael Blomfield

London Business School

Keyvan Vakili

London Business School

Date Written: December 30, 2016

Abstract

In this paper, we develop a formal model to investigate how resource-based incentives influence an agent’s allocation of effort. Our model shows how an agent changes the optimal allocation of a fixed amount of effort across different projects in response to changes in the effort cost of securing resources for each project. We use the insights from the model to explore the effectiveness of funding strategies designed to influence the research direction of academic scientists. Research funding is the primary lever firms and policymakers use to influence scientists’ research direction and output. However, prior research provides little theoretical insight into the effectiveness of such funding policies. We test our model’s predictions by examining how U.S. scientists working in stem cell research responded to a 2001 policy change that significantly restricted access to federal funding for research in the human embryonic stem cell (hESC) area. In line with our model’s predictions, we find that the increase in the effort cost of securing resources for hESC research inadvertently reduced U.S. scientists’ output in non-hESC areas of stem cell research–an effect that is strongest among the highest ability scientists. Our model and findings highlight the complexities of incentivizing effort allocation using resource-based incentives. In particular, we show how altering resource-based incentives in one area can have unforeseen spillover effects on effort allocation in other areas.

Keywords: Innovation direction, funding, research direction, research behavior, division of labor

Suggested Citation

Blomfield, Michael and Vakili, Keyvan, Incentivizing effort allocation through resource allocation: Evidence from scientists’ response to changes in funding policy (December 30, 2016). Forthcoming in Organization Science, Available at SSRN: https://ssrn.com/abstract=2924532 or http://dx.doi.org/10.2139/ssrn.2924532

Michael Blomfield

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Keyvan Vakili (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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