Entrepreneurial universities and overt opportunism

Entrepreneurial universities are a catalyst for regional economic development and growth. Yet, the entrepreneurial university may not always capture the full gains made by the broader economy due to opportunistic behavior by its faculty scientists. We expand agency theory to address conditions when opportunistic behavior persists in the face of substantial information symmetry and where principals appear to tolerate opportunism despite the authority to sanction their agents. Using a sample of 105 US research universities and 73,603 scientists, we demonstrate that some scientists privately leak discoveries invented while working for their universities. Counter to prior prediction, we find that universities acting as principals often do not retaliate even when having knowledge of such opportunistic behavior and the capability to punish non-complying agents. To extend theory, we examined contexts that exacerbate and alleviate such overt opportunism: High-value discoveries and sizable entrepreneurial activity are associated with greater opportunistic behavior, whereas efforts to empower those who have close professional ties with scientists—their departments and technology commercialization offices—are related to reduced opportunism. To complement our empirical analyses, we provide a stylized mathematical model that shows how agency theory can improve its predictive power once it formally recognizes certain conditions under which agents wield substantial bargaining power over their principals, who in turn seem to tolerate agents’ overt opportunistic behavior.