IDEAS home Printed from https://ideas.repec.org/a/eee/exehis/v47y2010i1p100-111.html
   My bibliography  Save this article

Incentives and innovation? R&D management in Germany's chemical and electrical engineering industries around 1900

Author

Listed:
  • Burhop, Carsten
  • Lübbers, Thorsten

Abstract

The allocation of intellectual property rights between firms and employed researchers causes a principal-agent problem between the two parties. We investigate the working contracts of researchers employed by German chemical and electrical engineering firms at the turn of the 20th century and show that the firms were aware of the principal-agent problem and offered performance-related compensation schemes to their scientists. We show that past bonuses are positively correlated with current patenting, whereas past total income is negatively associated with current patenting. Thus, we discover a trade-off between level and structure of compensation on the one hand and patenting activity on the other.

Suggested Citation

  • Burhop, Carsten & Lübbers, Thorsten, 2010. "Incentives and innovation? R&D management in Germany's chemical and electrical engineering industries around 1900," Explorations in Economic History, Elsevier, vol. 47(1), pages 100-111, January.
    • Handle: RePEc:eee:exehis:v:47:y:2010:i:1:p:100-111
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0014-4983(09)00036-9
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Anton, James J & Yao, Dennis A, 1994. "Expropriation and Inventions: Appropriable Rents in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 84(1), pages 190-209, March.
    2. Anya McGuirk & Aris Spanos, 2009. "Revisiting Error‐Autocorrelation Correction: Common Factor Restrictions and Granger Non‐Causality," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(2), pages 273-294, April.
    3. Philippe Aghion & Jean Tirole, 1994. "The Management of Innovation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 1185-1209.
    4. repec:fth:harver:1473 is not listed on IDEAS
    5. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    6. Zorina Khan & Kenneth L. Sokoloff, 2004. "Institutions and Democratic Invention in 19th-Century America: Evidence from "Great Inventors," 1790-1930," American Economic Review, American Economic Association, vol. 94(2), pages 395-401, May.
    7. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 287-343, National Bureau of Economic Research, Inc.
    8. David C. Mowery, 1995. "The Boundaries of the US Firm in R&D," NBER Chapters, in: Coordination and Information: Historical Perspectives on the Organization of Enterprise, pages 147-182, National Bureau of Economic Research, Inc.
    9. Josh Lerner & Julie Wulf, 2007. "Innovation and Incentives: Evidence from Corporate R&D," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 634-644, November.
    10. Anton, James J & Yao, Dennis A, 1995. "Start-ups, Spin-offs, and Internal Projects," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(2), pages 362-378, October.
    11. Henry Sauermann & Wesley M. Cohen, 2008. "What Makes Them Tick? Employee Motives and Firm Innovation," NBER Working Papers 14443, National Bureau of Economic Research, Inc.
    12. Honig-Haftel, Sandra & Martin, Linda R, 1993. "The Effectiveness of Reward Systems on Innovative Output: An Empirical Analysis," Small Business Economics, Springer, vol. 5(4), pages 261-269, December.
    13. Khan, B. Zorina, 1995. "Property Rights and Patent Litigation in Early Nineteenth-Century America," The Journal of Economic History, Cambridge University Press, vol. 55(1), pages 58-97, March.
    14. B. Zorina Khan, 2005. "The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790–1920," NBER Books, National Bureau of Economic Research, Inc, number khan05-1, March.
    15. Matthias Kräkel & Dirk Sliwka, 2009. "Should You Allow Your Employee To Become Your Competitor? On Noncompete Agreements In Employment Contracts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 117-141, February.
    16. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
    17. Naomi R. Lamoreaux & Daniel M. G. Raff, 1995. "Coordination and Information: Historical Perspectives on the Organization of Enterprise," NBER Books, National Bureau of Economic Research, Inc, number lamo95-1, March.
    18. Harhoff, Dietmar & Hoisl, Karin, 2007. "Institutionalized incentives for ingenuity--Patent value and the German Employees' Inventions Act," Research Policy, Elsevier, vol. 36(8), pages 1143-1162, October.
    19. Kirsten Labuske & Jochen Streb, 2008. "Technological Creativity and Cheap Labour? Explaining the Growing International Competitiveness of German Mechanical Engineering before World War I," German Economic Review, Verein für Socialpolitik, vol. 9, pages 65-86, February.
    20. Christine Macleod, 1999. "Negotiating the Rewards of Invention: The Shop-Floor Inventor in Victorian Britain," Business History, Taylor & Francis Journals, vol. 41(2), pages 17-36.
    21. Kirsten Labuske & Jochen Streb, 2008. "Technological Creativity and Cheap Labour? Explaining the Growing International Competitiveness of German Mechanical Engineering before World War I," German Economic Review, Verein für Socialpolitik, vol. 9(1), pages 65-86, February.
    22. Streb, Jochen & Wallusch, Jacek & Yin, Shuxi, 2007. "Knowledge spill-over from new to old industries: The case of German synthetic dyes and textiles (1878-1913)," Explorations in Economic History, Elsevier, vol. 44(2), pages 203-223, April.
    23. Sargan, J D, 1980. "Some Tests of Dynamic Specification for a Single Equation," Econometrica, Econometric Society, vol. 48(4), pages 879-897, May.
    24. Jochen Streb & Jörg Baten & Shuxi Yin, 2006. "Technological and geographical knowledge spillover in the German empire 1877–1918," Economic History Review, Economic History Society, vol. 59(2), pages 347-373, May.
    25. Marie Thursby & Richard Jensen, 2001. "Proofs and Prototypes for Sale: The Licensing of University Inventions," American Economic Review, American Economic Association, vol. 91(1), pages 240-259, March.
    26. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Richter, Ralf & Streb, Jochen, 2011. "Catching-Up and Falling Behind: Knowledge Spillover from American to German Machine Toolmakers," The Journal of Economic History, Cambridge University Press, vol. 71(4), pages 1006-1031, December.
    2. Francesco Cinnirella & Jochen Streb, 2013. "The Role of Human Capital and Innovation in Prussian Economic Development," CESifo Working Paper Series 4391, CESifo.
    3. Francesco Cinnirella & Jochen Streb, 2017. "The role of human capital and innovation in economic development: evidence from post-Malthusian Prussia," Journal of Economic Growth, Springer, vol. 22(2), pages 193-227, June.
    4. Toivanen, Otto & Väänänen, Lotta, 2010. "Returns to Inventors," CEPR Discussion Papers 7744, C.E.P.R. Discussion Papers.
    5. Krasteva, Silvana & Sharma, Priyanka & Wagman, Liad, 2015. "The 80/20 rule: Corporate support for innovation by employees," International Journal of Industrial Organization, Elsevier, vol. 38(C), pages 32-43.
    6. Patricio Sáiz & Rubén Amengual, 2018. "Do patents enable disclosure? Strategic innovation management of the four-stroke engine," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 27(6), pages 975-997.
    7. Hans K. Hvide & Eirik Gaard Kristiansen, 2012. "Management of Knowledge Workers," Journal of Law and Economics, University of Chicago Press, vol. 55(4), pages 815-838.
    8. Oliver Baumann & Nils Stieglitz, 2011. "Motivating Organizational Search," DRUID Working Papers 11-08, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    9. B. Zorina Khan & Kenneth L. Sokoloff, 2001. "The Early Development of Intellectual Property Institutions in the United States," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 233-246, Summer.
    10. Claire Bonnard, 2011. "Les incitations à l'innovation dans le secteur privé," Post-Print halshs-00599700, HAL.
    11. Joshua S. Gans & David H. Hsu & Scott Stern, 2002. "When Does Start-Up Innovation Spur the Gale of Creative Destruction?," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 571-586, Winter.
    12. Bruno Cassiman & Masako Ueda, 2006. "Optimal Project Rejection and New Firm Start-ups," Management Science, INFORMS, vol. 52(2), pages 262-275, February.
    13. Sudipto Bhattacharya & Sergei Guriev, 2006. "Patents vs. Trade Secrets: Knowledge Licensing and Spillover," Journal of the European Economic Association, MIT Press, vol. 4(6), pages 1112-1147, December.
    14. Iain Cockburn & Rebecca Henderson & Scott Stern, 1999. "Balancing Incentives: The Tension Between Basic and Applied Research," NBER Working Papers 6882, National Bureau of Economic Research, Inc.
    15. Carlos J. Serrano, 2010. "The dynamics of the transfer and renewal of patents," RAND Journal of Economics, RAND Corporation, vol. 41(4), pages 686-708, December.
    16. Ramana Nanda & William R. Kerr, 2015. "Financing Innovation," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 445-462, December.
    17. repec:hal:spmain:info:hdl:2441/3jesolrqda8pl9qj4osla4hevt is not listed on IDEAS
    18. Orman, Cuneyt, 2015. "Organization of innovation and capital markets," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 94-114.
    19. Silveira, Rafael & Wright, Randall, 2010. "Search and the market for ideas," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1550-1573, July.
    20. Alessandro Nuvolari & Michelangelo Vasta, 2015. "Independent invention in Italy during the Liberal Age, 1861–1913," Economic History Review, Economic History Society, vol. 68(3), pages 858-886, August.
    21. Chetty, Raj & Bell, Alex & Jaravel, Xavier & Petkova, Neviana & Van Reenen, John, 2019. "Do tax cuts produce more Einsteins? The impact of financial incentives vs. exposure to innovation on the supply of inventors," LSE Research Online Documents on Economics 102606, London School of Economics and Political Science, LSE Library.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:exehis:v:47:y:2010:i:1:p:100-111. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622830 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.