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Academic Freedom, Private-Sector Focus, and the Process of Innovation

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  • Stein, Jeremy C.
  • Dewatripont, Mathias
  • Aghion, Philippe

Abstract

We develop a model that clarifies the respective advantages and disadvantages of academic and private-sector research. Rather than relying on lack of appropriability or spillovers to generate a rationale for academic research, we emphasize control-rights considerations, and argue that the fundamental tradeoff between academia and the private sector is one of creative control versus focus. By serving as a precommitment mechanism that allows scientists to freely pursue their own interests, academia can be indispensable for early-stage research. At the same time, the private sector's ability to direct scientists toward higher-payoff activities makes it more attractive for later-stage research.

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File URL: http://dash.harvard.edu/bitstream/handle/1/3637074/aghion_academicfreedom.pdf
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Bibliographic Info

Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3637074.

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Date of creation: 2008
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Publication status: Published in The RAND Journal of Economics
Handle: RePEc:hrv:faseco:3637074

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  1. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Steven N. Kaplan & Berk A. Sensoy & Per Strömberg, 2005. "What Are Firms? Evolution from Birth to Public Companies," NBER Working Papers 11581, National Bureau of Economic Research, Inc.
  3. Scott Stern, 2004. "Do Scientists Pay to Be Scientists?," Management Science, INFORMS, vol. 50(6), pages 835-853, June.
  4. Saul Lach & Mark Schankerman, 2003. "Incentives and invention in universities," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
  5. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Scholarly Articles 4554125, Harvard University Department of Economics.
  6. Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1996. "The Proper Scope of Government: Theory and an Application to Prisons," NBER Working Papers 5744, National Bureau of Economic Research, Inc.
  7. Daron Acemoglu & Michael Kremer & Atif Mian, 2003. "Incentives in Markets, Firms and Governments," NBER Working Papers 9802, National Bureau of Economic Research, Inc.
  8. Ajay Agrawal & Rebecca Henderson, 2002. "Putting Patents in Context: Exploring Knowledge Transfer from MIT," Management Science, INFORMS, vol. 48(1), pages 44-60, January.
  9. Michael S. McPherson & Morton Owen Schapiro, 1999. "Tenure Issues in Higher Education," Journal of Economic Perspectives, American Economic Association, vol. 13(1), pages 85-98, Winter.
  10. Carmichael, H Lorne, 1988. "Incentives in Academics: Why Is There Tenure?," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 453-72, June.
  11. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
  12. Hellmann, Thomas F & Perotti, Enrico C, 2006. "The Circulation of Ideas: Firms Versus Markets," CEPR Discussion Papers 5469, C.E.P.R. Discussion Papers.
  13. Holmstrom, Bengt, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 169-82, January.
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