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Individual Preferences, Organization, and Competition in a Model of R&D Incentive Provision

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  • Nicola Lacetera
  • Lorenzo Zirulia

Abstract

Understanding the organization of R&D activities requires the simultaneous consideration of scientific workers' talent and tastes, companies' organizational choices, and the characteristics of the relevant industry. We develop a model of the provision of incentives to corporate scientists, in an environment where (1) scientists engage in multiple activities when performing research; (2) knowledge is not perfectly appropriable; (3) scientists are responsive to both monetary and non-monetary incentives; and (4) firms compete on the product market. We show that both the degree of knowledge spillovers and of market competition affect the incentives given to scientists, and these effects interact. First, high knowledge spillovers lead firms to soften incentives when product market competition is high, and to strengthen incentives when competition is low. Second, the relationship between the intensity of competition and the power of incentives is U-shaped, with the exact shape depending on the degree of knowledge spillovers. We also show that the performance-contingent pay for both applied and basic research increases with the non-pecuniary benefits that scientists obtain from research. We relate our findings to the existing empirical research, and also discuss their implications for management and public policy.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17031.

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Date of creation: May 2011
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Publication status: published as Lacetera, Nicola & Zirulia, Lorenzo, 2012. "Individual preferences, organization, and competition in a model of R&D incentive provision," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 550-570.
Handle: RePEc:nbr:nberwo:17031

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Cited by:
  1. Markus Simeth & Julio Raffo, 2013. "What makes companies pursue an open science strategy?," WIPO Economic Research Working Papers, World Intellectual Property Organization - Economics and Statistics Division 06, World Intellectual Property Organization - Economics and Statistics Division, revised Apr 2013.
  2. Lissoni, Francesco & Fabio, Montobbio, 2012. "Inventorship and authorship as attribution rights: An enquiry into the economics of scientific credit," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201221, University of Turin.
  3. repec:wip:wpaper:6 is not listed on IDEAS

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