Incentives and Innovation? R&D Management in Germany's High-Tech Industries During the Second Industrial Revolution

27 Pages Posted: 26 Nov 2008  

Carsten Burhop

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods

Thorsten Luebbers

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods

Date Written: October 2008

Abstract

The allocation of intellectual property rights between firms and employed researchers causes a principal-agent problem between the two parties. We investigate the working contracts of inventors employed by German chemical, pharmaceutical, and electrical engineering firms at the turn of the 20th century and show that some firms were aware of the principal-agent problem and offered performance-related compensation schemes to their scientists. However, neither a higher total compensation nor a higher share of variable compensation in total compensation is correlated with a higher innovative output. Thus, incentives techniques were already used during the early history of industrial research laboratories, but their impact on innovative output was unsystematic.

Keywords: Compensation packages, incentives, innovation, economic history, Germany, pre-1913

JEL Classification: N83, O31, J33

Suggested Citation

Burhop, Carsten and Luebbers, Thorsten, Incentives and Innovation? R&D Management in Germany's High-Tech Industries During the Second Industrial Revolution (October 2008). MPI Collective Goods Preprint, No. 2008/38. Available at SSRN: https://ssrn.com/abstract=1307617 or http://dx.doi.org/10.2139/ssrn.1307617

Carsten Burhop (Contact Author)

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

Thorsten Luebbers

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

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