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Incentives and invention in universities

  • Saul Lach
  • Mark Schankerman

We show that economic incentives affect the commercial value of inventions generated in universities. Using data for 102 U.S. universities during the period 1991-1999, we find that universities which give higher royalty shares to academic scientists generate higher license income, controlling for other factors including university size, quality, research funding and technology licensing inputs. We provide evidence that this is due to the fact that public universities are less effective at commercialising inventions, which weakens the incentive effect of higher royalty shares. Other findings include: 1) there is a Laffer effect in private universities: raising the inventor's royalty share increases the license income retained by the university; 2) the incentive effect works primarily by increasing the quality of inventions, and 3) the incentive effect appears to operate both by raising faculty effort and by sorting academic scientists across universities.

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File URL: http://eprints.lse.ac.uk/4711/
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 4711.

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Length: 60 pages
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:ehl:lserod:4711
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