Individual Preferences, Organization, and Competition in a Model of R&D Incentive Provision

34 Pages Posted: 9 May 2011 Last revised: 16 Jul 2023

See all articles by Nicola Lacetera

Nicola Lacetera

University of Toronto - Strategic Management; University of Toronto at Mississauga - Department of Management; National Bureau of Economic Research (NBER)

Lorenzo Zirulia

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2011

Abstract

Understanding the organization of R&D activities requires the simultaneous consideration of scientific workers' talent and tastes, companies' organizational choices, and the characteristics of the relevant industry. We develop a model of the provision of incentives to corporate scientists, in an environment where (1) scientists engage in multiple activities when performing research; (2) knowledge is not perfectly appropriable; (3) scientists are responsive to both monetary and non-monetary incentives; and (4) firms compete on the product market. We show that both the degree of knowledge spillovers and of market competition affect the incentives given to scientists, and these effects interact. First, high knowledge spillovers lead firms to soften incentives when product market competition is high, and to strengthen incentives when competition is low. Second, the relationship between the intensity of competition and the power of incentives is U-shaped, with the exact shape depending on the degree of knowledge spillovers. We also show that the performance-contingent pay for both applied and basic research increases with the non-pecuniary benefits that scientists obtain from research. We relate our findings to the existing empirical research, and also discuss their implications for management and public policy.

Suggested Citation

Lacetera, Nicola and Zirulia, Lorenzo, Individual Preferences, Organization, and Competition in a Model of R&D Incentive Provision (May 2011). NBER Working Paper No. w17031, Available at SSRN: https://ssrn.com/abstract=1833167

Nicola Lacetera (Contact Author)

University of Toronto - Strategic Management ( email )

Canada

University of Toronto at Mississauga - Department of Management

Canada

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Lorenzo Zirulia

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

Via Conservatorio, 7
Milan, 20122
Italy

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
37
Abstract Views
1,912
PlumX Metrics