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Patents in the University: Priming the Pump and Crowding Out

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  • Suzanne Scotchmer

Abstract

The Bayh-Dole Act allows universities to exploit patents on their federally sponsored research. University laboratories therefore have two sources of funds: direct grants from sponsors and income from licensing. Tax credits for private R&D also contribute, because they increase the profitability of licensing. Because Bayh-Dole profits are a source of funds, the question arises how subsidies and Bayh-Dole profits fit together. I show that subsidies to the university can either "prime the pump" for spending out of Bayh-Dole funds, or can crowd it out. Because of crowding out, if the sponsor wants to increase university spending beyond the university's own target, it will end up funding the entire research bill, just as if there were no profit opportunities under the Bayh-Dole Act. A subsidy system that requires university matching can mitigate this problem.

Suggested Citation

  • Suzanne Scotchmer, 2013. "Patents in the University: Priming the Pump and Crowding Out," NBER Working Papers 19252, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:19252
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    JEL classification:

    • K0 - Law and Economics - - General
    • L00 - Industrial Organization - - General - - - General
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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