Innovation and Incentives: Evidence from Corporate R&D

Wulf, Julie; Lerner, Josh

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Innovation and Incentives: Evidence from Corporate R&D

Review of Economics and Statistics, Forthcoming

35 Pages Posted: 10 Jan 2006

See all articles by Julie Wulf

Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Harvard University - Private Capital Research Institute

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Abstract

Beginning in the late 1980s, American corporations began increasingly linking the compensation of central research personnel to the economic objectives of the corporation. This paper examines the impact of the shifting compensation of the heads of corporate research and development. Among firms with centralized R&D organizations, a clear relationship emerges: more long-term incentives (e.g. stock options and restricted stock) are associated with more heavily cited patents. These incentives also appear to be associated with more patent filings and patents of greater originality. Short-term incentives appear to be unrelated to measures of innovation.

Keywords: research and development, laboratory, compensation

JEL Classification: 03, J3

Suggested Citation: Suggested Citation

Wulf, Julie M. and Lerner, Josh, Innovation and Incentives: Evidence from Corporate R&D. Review of Economics and Statistics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=873925