Incentivizing Effort Allocation Through Resource Allocation: Evidence from Scientists’ Response to Changes in Funding Policy (w/ Keyvan Vakili), Organization Science, https://doi.org/10.1287/orsc.2021.1565
A wide range of organizations sponsor academic science to attract research to topics of strategic interest to the sponsor. Yet we know little about how effectively sponsoring organizations can steer the research direction of academic scientists. Academic scientists face a dual incentive structure. On one hand, incentives from a reputational reward system promote research in topics deemed most promising by the scientific community. On the other hand, incentives also emerge from differences in costs of conducting research on different topics. Sponsoring organizations aim to influence the latter. However, we argue that the exponentially skewed reputational rewards associated with promising scientific topics can limit the effectiveness of this channel. Consequently, sponsors may fail to induce a scientist to switch to research topics that are of interest to the sponsor but deemed less promising by the scientific community. We test our prediction by exploiting a policy change in funding for stem cell research in the United States in 2001. This reallocated resources from the topics deemed most promising to other areas of stem cell research. We find little evidence that U.S. scientists reallocated research efforts to those areas. In fact, we observe changes in scientific productivity, collaboration patterns, and mobility to industry that suggest U.S. scientists might have reduced their investments in the less promising areas to secure new sources of funding for research in the more promising areas. Our results provide novel insights into how scientists strategically respond to external incentives aimed at influencing their research direction.
Diversity, Openness, and the Social Context of Innovation: Evidence from Civil Rights Protests
The rate of innovation and technological change is not just a question of innovation incentives, but also thew ability of would-be innovators to identify new ideas and innovation opportunities. The environment in which people are located, in part, shapes the ways they can conceive of new opportunities – alongside individual- or organization-level factors. This paper examines the social context of innovation. In particular, I analyze how changes in a local environment that increase openness and tolerance to diversity affect local innovation rates. I use historical patent data during the twenty-year period from 1955 to 1974 to identify county-level patent rates based on the location of inventors. I match this to data on the location of U.S. civil rights protests from 1960 to 1964 inclusive, during which time public participation in, and attention to, the civil rights movement peaked. I show that areas in which there were local civil rights protests in the early-1960s experienced higher rates of innovation from the mid-1960s. I control for a range of demographic variables and use local precipitation as an instrument for protests to support a causal interpretation of my results. While the primary social value of the civil rights movement is its hard-won gains for marginalized groups, it had the second order effect of increasing innovation in areas with more active local movements. Prior research has shown that local protests increased liberal social values in the local population. My findings suggest that this change in the local social context also led to increased innovation. The results demonstrate the importance of social norms and values to innovation. Additionally, at a time when some policymakers and commentators implicitly frame protests for civil rights as representing zero-sum group competition, the results also show how change induced by movements for equality can lead to broad-based gains for society.
The Exportation of Science from Low- and Middle-Income Countries, (w/ Anita McGahan and Keyvan Vakili)
Revise & Resubmit, Strategic Management Journal
Scholars studying systems of innovation have examined whether the Trade-Related Intellectual Property System (TRIPS) Agreement has benefited low- and middle-income countries (LMICs) that were compelled to comply as a condition of membership in the World Trade Organization. A number of mechanisms involving incentives, innovation, and knowledge diffusion have been explored, with mixed and weak evidence of delayed benefits for LMICs from TRIPS. In this paper, we examine an underexplored effect of TRIPS, namely the dissemination after TRIPS of scientific knowledge from LMICs into high-income countries (HICs) that may have accelerated both discovery and commercialization of drugs relevant specifically to patients in LMICs. In difference-in-difference analyses, we find significant evidence of increased diffusion of scientific knowledge that had been published prior to TRIPS by authors located in LMICs. This and several associated findings suggest that the implementation of TRIPS in LMICs is strongly associated with changes in the behavior of scientists in HICs. The results raise new questions regarding the effects of TRIPS and, more broadly, of patent protection on incentives, institutions, and knowledge diffusion. They also point to a complex impact of TRIPS involving the exportation of science from LMICs for subsequent drug development. We find a rapid increase in scientific attention to pre-existing articles from authors in countries that implement TRIPS and that this knowledge also increasingly diffuses into the patent literature over time. Notably, these attention effects are especially pronounced for neglected diseases and it is primarily academic scientists who primarily increase the use of this knowledge in patented inventions.
Scientific Human Capital and Institutional Incentives: The Roles of Topic Knowledge and Research Skills
Academic scientists develop deep topic knowledge in highly specialized niches. However, they also acquire extensive skills to undertake advanced research in their fields. Prior research examining how firms use scientists’ human capital typically focuses on a generalist-specialist distinction in breadth of topic knowledge or a basic-applied distinction in research orientation. This paper emphasizes an alternative distinction between two dimensions of scientific human capital: topic knowledge and scientific research skills. For example, in the social sciences, an economist might have a set of advanced microeconometric skills that she applies to research in labor economics, whereas another economist may have the same set of specialized research skills and apply them to topics across labor, development, and public economics. A further economist may focus on labor economics but use a broader set of methodological approaches in addition to microeconometric analysis, such as dynamic programming, simulations, and field experiments. This example highlights how focusing only on topic specialization or generalism can mask important variation in the breadth of researchers' human capital. In this paper, build on prior literature on scientific careers and the logic of scientific inquiry to analyze how each dimension provides value in corporate research. I test my arguments using longitudinal data on researchers in regenerative medicine. While scientists moving to industry have more conceptually diverse subsequent research output, there is little evidence of other changes in their research productivity, impact, or basic-applied focus. This is consistent with industry more highly valuing the wider research skills of scientists hired from academia. It contrasts with a view in which firms primarily focus on exploiting highly specialized, but narrow, topic knowledge for commercial purposes. The findings also provide insights into how the division of scientific labor between academia and industry may shape the knowledge accumulation process in areas where academic and commercial research overlap.
Does Corporate Science Matter? Absorptive Capacity, R&D Focus, and Responses to Knowledge Spillovers
Knowledge spillovers between firms are seen to be important for growth by facilitating greater cumulative innovation. This provides a rationale for public policies that subsidize R&D to ensure R&D is not underprovided by market actors who do not internally capture the full social value of these knowledge externalities. This paper delineates inventive- and scientific-focused R&D capabilities and shows how these lead firms to make different strategic responses to increases in external knowledge spillovers. Corporate R&D capabilities that focus primarily on invention lead firms to substitute internal R&D investment with knowledge from spillovers. Conversely, scientific-focused R&D capabilities provide firms greater ability to situate external knowledge in the scientific landscape and understand its potential more fully. This creates complementarities between internal R&D and knowledge spillovers by enabling firms to identify new opportunities for developing ideas. I use changes in corporate and R&D tax credit rates to generate exogenous variation in knowledge spillovers. I use this to identify systematic variation in the causal effects of spillovers according to firms’ ex ante inventive and scientific R&D capabilities. My findings have important implications for public policies that seek to increase aggregate innovation by subsidizing R&D to facilitate greater knowledge spillovers. Different dimensions of firms' R&D capabilities are associated with distinct strategic responses to external knowledge production. At at time when recent research has suggested that firms are withdrawing from scientific research, these findings have especially pertinent consequences for those designing R&D policies with the aim of increasing aggregate knowledge production in the economy.