How Do Inventors Respond to Financial Incentives? - Evidence from the 2001 Court Decision on Employee Inventions in Japan

42 Pages Posted: 28 Aug 2017

See all articles by Koichiro Onishi

Koichiro Onishi

Waseda University - Faculty of Education and Integrated Arts and Sciences

Hideo Owan

University of Tokyo

Sadao Nagaoka

Hitotsubashi University - Institute of Innovation Research

Date Written: August 2017

Abstract

Using a novel panel dataset of corporate inventors matched with their employers in Japan, we examine the effects of output-based financial incentives on corporate inventor’s performance. We exploit the 2001 court decision that discontinuously forced many firms to adopt or strengthen the financial incentives based on the commercial success of an invention. Our estimations that account for inventor heterogeneity reveal that the compulsion of stronger financial incentive did not increase citation-weighted patent counts at the inventor level and significantly decreased the number of science-based patents. These results show that financial incentives based on the commercialization performance of an invention can be counter-productive means to enhance inventors’ performance, and that the compulsion of such remuneration to employee-inventors in the article 35 of Japanese patent law could distort the efficiency of corporate R&D.

Keywords: Financial incentive, Corporate researcher, Inventive performance, Patent

JEL Classification: O31, K20, O34

Suggested Citation

Onishi, Koichiro and Owan, Hideo and Nagaoka, Sadao, How Do Inventors Respond to Financial Incentives? - Evidence from the 2001 Court Decision on Employee Inventions in Japan (August 2017). Available at SSRN: https://ssrn.com/abstract=3025512 or http://dx.doi.org/10.2139/ssrn.3025512

Koichiro Onishi (Contact Author)

Waseda University - Faculty of Education and Integrated Arts and Sciences ( email )

1-6-1 Nishi-waseda
Shinjuku-ku
Tokyo, 1698050
Japan

Hideo Owan

University of Tokyo ( email )

Hongo 7-3-1
Tokyo, TOKYO 113-0033
Japan

Sadao Nagaoka

Hitotsubashi University - Institute of Innovation Research ( email )

2-1 Naka Kunitachi-shi
Tokyo 186-8601
Japan

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