Ideas and Innovations: Which Should Be Subsidized?

22 Pages Posted: 5 Feb 2011  

Suzanne Scotchmer

University of California - Department of Economics ; School of Law, University of California, Berkeley; National Bureau of Economic Research (NBER)

Date Written: January 11, 2011

Abstract

The Bayh-Dole Act allows universities to commercialize their research. University laboratories therefore have two sources of funds: direct grants from the government and funds from commercialization. In addition to giving direct subsidies to university laboratories, the government also subsidizes the commercial sector, for example, through tax credits. Subsidies to commerce contribute indirectly to the university's research budget, because they increase the profit from commercialization. This paper investigates the optimal mix of direct and indirect subsidies to the university, in a context where the role of university research is to turn up "ideas" for commercial investments, and the role of commerce is to turn the ideas into innovations. It also asks whether there is an argument for protecting "ideas" as well as commercializations, as is authorized by the Bayh-Dole Act.

Keywords: Innovation, Research Subsidy, Tax Credits, Bayh-Dole Act, Research Ideas

JEL Classification: O34, K00, L00

Suggested Citation

Scotchmer, Suzanne, Ideas and Innovations: Which Should Be Subsidized? (January 11, 2011). Available at SSRN: https://ssrn.com/abstract=1755091 or http://dx.doi.org/10.2139/ssrn.1755091

Suzanne Scotchmer (Contact Author)

University of California - Department of Economics ( email )

Berkeley, CA 94720-3880
United States
510-643-8562 (Phone)

School of Law, University of California, Berkeley ( email )

215 Boalt Hall
Berkeley, CA 94720-7200
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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