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Academic freedom, private-sector focus, and the process of innovation

  • Philippe Aghion
  • Mathias Dewatripont
  • Jeremy C. Stein

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. Copyright (c) 2008, RAND.

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Article provided by RAND Corporation in its journal The RAND Journal of Economics.

Volume (Year): 39 (2008)
Issue (Month): 3 ()
Pages: 617-635

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Handle: RePEc:bla:randje:v:39:y:2008:i:3:p:617-635
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  1. Oliver Hart & Andrei Shleifer & Robert Vishny, 1996. "The Proper Scope of Government: Theory and an Application to Prisons," Harvard Institute of Economic Research Working Papers 1778, Harvard - Institute of Economic Research.
  2. Carmichael, H Lorne, 1988. "Incentives in Academics: Why Is There Tenure?," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 453-72, June.
  3. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December.
  4. Saul Lach & Mark Schankerman, 2003. "Incentives and Invention in Universities," NBER Working Papers 9727, National Bureau of Economic Research, Inc.
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  6. Philippe Aghion & Jean Tirole, 1994. "Normal and Real Authority in Organizations," Working papers 94-13, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers 6875, National Bureau of Economic Research, Inc.
  8. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
  9. Hellmann, Thomas F & Perotti, Enrico C, 2006. "The Circulation of Ideas: Firms Versus Markets," CEPR Discussion Papers 5469, C.E.P.R. Discussion Papers.
  10. Scott Stern, 2004. "Do Scientists Pay to Be Scientists?," Management Science, INFORMS, vol. 50(6), pages 835-853, June.
  11. Ajay Agrawal & Rebecca Henderson, 2002. "Putting Patents in Context: Exploring Knowledge Transfer from MIT," Management Science, INFORMS, vol. 48(1), pages 44-60, January.
  12. Daron Acemoglu & Michael Kremer & Atif Mian, 2003. "Incentives in Markets, Firms and Governments," NBER Working Papers 9802, National Bureau of Economic Research, Inc.
  13. Michael S. McPherson & Morton Owen Schapiro, 1999. "Tenure Issues in Higher Education," Journal of Economic Perspectives, American Economic Association, vol. 13(1), pages 85-98, Winter.
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