November 2007
Article
Review of Economics and Statistics

Innovation and Incentives: Evidence from Corporate R&D

By: Josh Lerner and Julie Wulf

Format:Print
| Pages:11

Abstract

Beginning in the late 1980s, American corporations began increasingly linking the compensation of central research personnel to the economic objectives of the corporation. This paper examines the impact of the shifting compensation of the heads of corporate research and development. Among firms with centralized R&D organizations, a clear relationship emerges: more long-term incentives (e.g. stock options and restricted stock) are associated with more heavily cited patents. These incentives also appear to be associated with more patent filings and patents of greater originality. Short-term incentives appear to be unrelated to measures of innovation.

Keywords

Innovation and Invention; Motivation and Incentives; Goals and Objectives; Research and Development; Patents; Employee Stock Ownership Plan

Citation

Lerner, Josh, and Julie Wulf. "Innovation and Incentives: Evidence from Corporate R&D." Review of Economics and Statistics 89, no. 4 (November 2007): 634–644.