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Incentives and invention in universities

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  • Saul Lach
  • Mark Schankerman

Abstract

We show that universities in the United States that provide stronger royalty incentives to faculty scientists generate greater license income, controlling for university characteristics. We use pre‐sample data on university patenting to control for the potential endogeneity of royalty shares. Faculty responds to royalties both in the form of cash and research lab support, indicating both pecuniary and intrinsic research motivations. The impact of incentives is larger in private than in public universities, and we provide new survey evidence on the organization and objectives of university licensing offices to explain this difference. Royalty incentives work both by raising faculty effort and sorting scientists across universities. The primary impact of incentives is to increase the quality rather than the quantity of inventions.

Suggested Citation

  • Saul Lach & Mark Schankerman, 2008. "Incentives and invention in universities," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 403-433, June.
    • Handle: RePEc:bla:randje:v:39:y:2008:i:2:p:403-433
    DOI: 10.1111/j.0741-6261.2008.00020.x
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    More about this item

    JEL classification:

    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education

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