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Incentives and Innovation? R&D Management in Germany’s High-Tech Industries During the Second Industrial Revolution

Author

Listed:
  • Carsten Burhop

    () (Max Planck Institute for Research on Collective Goods, Bonn)

  • Thorsten Lübbers

    () (Max Planck Institute for Research on Collective Goods, Bonn)

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 inventors employed by German chemical, pharmaceutical, and electrical engineering firms at the turn of the 20th century and show that some firms were aware of the principal-agent problem and offered performance-related compensation schemes to their scientists. However, neither a higher total compensation nor a higher share of variable compensation in total compensation is correlated with a higher innovative output. Thus, incentives techniques were already used during the early history of industrial research laboratories, but their impact on innovative output was unsystematic.

Suggested Citation

  • Carsten Burhop & Thorsten Lübbers, 2008. "Incentives and Innovation? R&D Management in Germany’s High-Tech Industries During the Second Industrial Revolution," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2008_38, Max Planck Institute for Research on Collective Goods.
  • Handle: RePEc:mpg:wpaper:2008_38
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    File URL: http://www.coll.mpg.de/pdf_dat/2008_38online.pdf
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    Keywords

    Compensation packages; incentives; innovation; economic history; Germany; pre-1913;

    JEL classification:

    • N83 - Economic History - - Micro-Business History - - - Europe: Pre-1913
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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