Academic contribution to industrial innovation by funding type

Universities are an important actor for innovation. Their contributions to technological and scientific knowledge development have been supported by various types of funding. The current study investigates the impacts of two academic research funding sources—industry and competitive—on academic patents. We measure the effects with two indicators—creation of progenitor inventions and the degree of diffusion. Using a patent database, this paper identifies a progenitor invention if a patent is granted without any backward citations and measures the degree of diffusion with patent citations. Focusing on Japanese university patents, the main finding of this paper is that competitive funding tends to produce progenitor inventions whereas industry funding is not likely to do so. By contrast, inventions produced from competitive funding are not likely to diffuse, whereas those produced from industry funding are likely to diffuse. Based on our findings, we argue that the competitive funding may work better when diffusion mechanism is introduced. An example is to increase academic researchers’ proximity to the industry. Additionally, our findings also imply that when setting new funding or changing academic funding system such as replacing block funding with other types, it is important to understand what kind of outcomes are expected from the funding method.