The Research Money Can't Buy: Sponsoring Academic Science in the Shadow of Reputational Rewards
(with Keyvan Vakili), Revise & Resubmit, Organization Science
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.
More in Common, Further Apart? Common Institutional Ownership and Firms’ Innovation Decisions
Job Market Paper
The role firms’ institutional owners play in corporate innovation decisions has received significant attention from scholars across the economics, finance, and strategy fields. In recent years, there has been a large increase in institutional investors having large shareholdings in multiple firms that compete in the same industry. In this paper, I use detailed drug project data to analyze the relationship between this overlapping ownership and pharmaceutical companies’ decisions to invest in developing drug projects. I find little evidence that higher rates of aggregate common ownership between a focal firm and its industry peers are associated with changes in the firm’s overall rate of innovation project development. However, by exploiting the within-firm variation in a focal firm’s ownership overlap with incumbents in different drug markets, I find significant changes in the direction of innovation within firms. I show that a focal firm having greater aggregate common ownership with incumbents in a drug market is associated with a lower probability that a project in that market has a development event. I also find qualitative changes in the types of projects that firms initiate in drug markets in which they are exposed to greater aggregate common ownership. I build on prior research in organizational economics and strategy to propose and test an explanatory mechanism in which managers’ career concerns are altered by common ownership. I find supportive evidence for this mechanism. Additionally, I show that the relationship between drug market-level common ownership and project development is attenuated when CEOs’ wealth is tied more strongly to firm performance.
Hiring for Knowledge or Skills: How Do Firms Use Scientific Human Capital Acquired from Academia?
Academic scientists develop deep topic knowledge in highly specialized niches. However, they also develop extensive skills used to carry out advanced research in their fields. The literature has typically focused on a generalist-specialist distinction in topic knowledge when seeking to understand how firms benefit from hiring scientists from academia. In this paper, I propose an alternative distinction between two dimensions of scientific human capital: topic knowledge and scientific research skills. I build on prior literature on scientific careers and the logic of scientific inquiry, alongside research in the absorptive capacity tradition and agency theory to analyze how each dimension can provide value to firms in corporate research. I argue that, relative to academia, firms will value flexibility in applying scientists’ human capital and eschew projects with greater potential divergence in commercial and scientific value. This, in turn, will shape the relative returns to topic knowledge and scientific research skills in firms’ human capital strategies. I test my arguments empirically using longitudinal data on U.S. scientists working in stem cell research. I show that academic scientists transitioning to industry employment have more conceptually diverse subsequent research output. This is consistent with industry placing a higher value on the scientific research skills of academic hires in their human capital strategies. It contrasts with a view in which firms hire experienced scientists with the primary intention of exploiting their highly specialized, but narrow, topic knowledge for commercial purposes. I also use my findings to draw implications on how the division of scientific labor between industry and academia affects scientific knowledge accumulation in ‘Pasteur’s Quadrant’ where basic science and use-inspired research overlap.
The Impact of TRIPS on the Diffusion of Knowledge in Science and Commercialization
(with Anita McGahan and Keyvan Vakili), Work in Progress