Patents in the University: Priming the Pump and Crowding Out

38 Pages Posted: 19 Jul 2013

See all articles by Suzanne Scotchmer

Suzanne Scotchmer

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

Multiple version iconThere are 3 versions of this paper

Date Written: June 17, 2013

Abstract

The Bayh-Dole Act allows universities to exploit patents on their federally sponsored research. University laboratories therefore have two sources of funds: direct grants from sponsors and income from licensing. Tax credits for private R&D also contribute, because they increase the profitability of licensing. Because Bayh-Dole profits are a source of funds, the question arises how subsidies and Bayh-Dole profits fit together. I show that subsidies to the university can either "prime the pump" for spending out of Bayh-Dole funds, or can crowd it out. Because of crowding out, if the sponsor wants to increase university spending beyond the university's own target, it will end up funding the entire research bill, just as if there were no profit opportunities under the Bayh-Dole Act. A subsidy system that requires university matching can mitigate this problem.

Keywords: research subsidy, tax credits, Bayh-Dole Act, matching grants, crowding out

JEL Classification: O34, K00, L00

Suggested Citation

Scotchmer, Suzanne, Patents in the University: Priming the Pump and Crowding Out (June 17, 2013). Available at SSRN: https://ssrn.com/abstract=2294913 or http://dx.doi.org/10.2139/ssrn.2294913

Suzanne Scotchmer (Contact Author)

University of California - Department of Economics (Deceased)

Berkeley, CA 94720-3880
United States

University of California, Berkeley - School of Law

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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