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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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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. Lach, Saul & Schankerman, Mark, 2003. "Incentives and Invention in Universities," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3916, C.E.P.R. Discussion Papers.
  2. Ajay Agrawal & Rebecca Henderson, 2002. "Putting Patents in Context: Exploring Knowledge Transfer from MIT," Management Science, INFORMS, INFORMS, vol. 48(1), pages 44-60, January.
  3. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(6), pages 1119-58, December.
  4. Kaplan, Steven & Sensoy, Berk A. & Strömberg, Per Johan, 2005. "What are Firms? Evolution from Birth to Public Companies," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5224, C.E.P.R. Discussion Papers.
  5. Daron Acemoglu & Michael Kremer & Atif Mian, 2003. "Incentives in Markets, Firms and Governments," NBER Working Papers, National Bureau of Economic Research, Inc 9802, National Bureau of Economic Research, Inc.
  6. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, National Bureau of Economic Research, Inc, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
  7. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Scholarly Articles, Harvard University Department of Economics 4554125, Harvard University Department of Economics.
  8. Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers, National Bureau of Economic Research, Inc 6875, National Bureau of Economic Research, Inc.
  9. Hart, Oliver & Shleifer, Andrei & Vishny, Robert W, 1997. "The Proper Scope of Government: Theory and an Application to Prisons," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(4), pages 1127-61, November.
  10. Carmichael, H Lorne, 1988. "Incentives in Academics: Why Is There Tenure?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(3), pages 453-72, June.
  11. Michael S. McPherson & Morton Owen Schapiro, 1999. "Tenure Issues in Higher Education," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 13(1), pages 85-98, Winter.
  12. Hellmann, Thomas F & Perotti, Enrico C, 2006. "The Circulation of Ideas: Firms Versus Markets," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5469, C.E.P.R. Discussion Papers.
  13. Scott Stern, 2004. "Do Scientists Pay to Be Scientists?," Management Science, INFORMS, INFORMS, vol. 50(6), pages 835-853, June.
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