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

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  • Philippe Aghion
  • Mathias Dewatripont
  • Jeremy C. Stein

Abstract

We develop a model that clarifies the respective advantages and disadvantages of academic and private-sector research. Our model assumes full protection of intellectual property rights at all stages of the development process, and hence does not rely on lack of appropriability or spillovers to generate a rationale for academic research. Instead, we focus on 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%u2019s ability to direct scientists towards higher-payoff activities makes it more attractive for later-stage research.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11542.

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Date of creation: Aug 2005
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Publication status: published as Philippe Aghion & Mathias Dewatripont & Jeremy C. Stein, 2008. "Academic freedom, private-sector focus, and the process of innovation," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 617-635.
Handle: RePEc:nbr:nberwo:11542

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  8. Holmstrom, Bengt, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 66(1), pages 169-82, January.
  9. Atif Mian, 2008. "Incentives in Markets, Firms, and Governments," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 24(2), pages 273-306, October.
  10. 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.
  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.
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