Incentives and Invention in Universities

62 Pages Posted: 11 Jul 2008

See all articles by Saul Lach

Saul Lach

Hebrew University of Jerusalem - Department of Economics; CEPR

Mark A. Schankerman

London School of Economics and Political Science; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 4 versions of this paper

Date Written: March 2004

Abstract

We show that economic incentives affect the commercial value of inventions generated in universities. Using data for 102 U.S. universities during the period 1991-1999, we find that universities which give higher royalty shares to academic scientists generate higher license income, controlling for other factors including university size, quality, research funding and technology licensing inputs. We provide evidence that this is due to the fact that public universities are less effective at commercialising inventions, which weakens the incentive effect of higher royalty shares. Other findings include: 1) there is a Laffer effect in private universities: raising the inventor's royalty share increases the license income retained by the university; 2) the incentive effect works primarily by increasing the quality of inventions, and 3) the incentive effect appears to operate both by raising faculty effort and by sorting academic scientists across universities.

JEL Classification: L10, L60

Suggested Citation

Lach, Saul and Schankerman, Mark A., Incentives and Invention in Universities (March 2004). LSE STICERD Research Paper No. EI33. Available at SSRN: https://ssrn.com/abstract=1158310

Saul Lach (Contact Author)

Hebrew University of Jerusalem - Department of Economics ( email )

Mount Scopus
Jerusalem, 91905
Israel
+972 2 588 3253 (Phone)
+972 2 581 6071 (Fax)

HOME PAGE: http://economics.huji.ac.il/facultye/saul/saul.html

CEPR

London
United Kingdom

Mark A. Schankerman

London School of Economics and Political Science ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7518 (Phone)
+44 20 7831 1840 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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