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Efficient compensation for employees' inventions

  • Roland Kirstein

    ()

  • Birgit Will

    ()

We analyze the legal reform concerning employees' inventions in Germany. Using a simple principal-agent model, we derive a unique efficient payment scheme: a bonus which is contingent on the project value. We demonstrate that the old German law creates inefficient incentives. However, the new law concerning university employees and the pending reform proposal concerning other employees also fail to implement first-best incentives. With suboptimal incentives to spend effort on inventions, the government's goal, an increase in the number of patents, is likely to be missed.

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File URL: http://hdl.handle.net/10.1007/s10657-006-6646-1
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Article provided by Springer in its journal European Journal of Law and Economics.

Volume (Year): 21 (2006)
Issue (Month): 2 (April)
Pages: 129-148

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Handle: RePEc:kap:ejlwec:v:21:y:2006:i:2:p:129-148
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100264

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