EconPapers    
Economics at your fingertips  
 

How Do Inventors Respond to Financial Incentives? Evidence from Unanticipated Court Decisions on Employees’ Inventions in Japan

Koichiro Onishi, Hideo Owan and Sadao Nagaoka

Journal of Law and Economics, 2021, vol. 64, issue 2, 301 - 339

Abstract: We use a novel panel data set of corporate inventors matched with their employers in Japan to examine the effects of output-based financial incentives on corporate inventors’ performance. We exploit heterogeneous industry responses to Japanese court decisions that forced Japanese firms to introduce stronger incentives. We show, first, that only industries facing a high risk of employee-inventor lawsuits adopted or significantly strengthened financial incentives based on the commercial success of inventions in response to the court decisions. Our estimations reveal that stronger financial incentives in such industries reduced the number of highly cited patents and significantly decreased the incidence of science-based patents after technology-specific year effects are controlled for. These results show that the compulsion to remunerate employee-inventors on the basis of the commercial success of their inventions could distort the efficiency of corporate research and development and illustrate the importance of contracting freedom.

Date: 2021
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://dx.doi.org/10.1086/712657 (application/pdf)
http://dx.doi.org/10.1086/712657 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlawec:doi:10.1086/712657

Access Statistics for this article

More articles in Journal of Law and Economics from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().

 
Page updated 2022-03-29
Handle: RePEc:ucp:jlawec:doi:10.1086/712657