On the Firms’ Decision to Hire Academic Scientists

Catalina Martínez and Sarah Parlane

No 201801, Working Papers from School of Economics, University College Dublin

Abstract: Firms hire scientists to increase their absorptive capacity and generate new knowledge and innovations. In this paper, we analyse a firm’s optimal contracting decisions when scientists have differing tastes for science. The contracted scientist engages in multitasking following her own academic agenda and the firm’s agenda and each task delivers distinct outcomes. Our setting disentangles the productivity and absorptive capacity effects for the firm as well as the preference and opportunity costeffects for the scientists. The productivity effect refers to a scientist’s contribution to profits by improving efficiency or by developing new products. The absorptive capacity effect relates to the ability of the hired scientist to assimilate the knowledge produced elsewhere for the benefit of the firm. The preference effect reflects the fact that scientists, unlike other knowledge workers, have a taste for science and accept lower wages when allowed to pursue a personal academic agenda. The opportunity cost effect captures the fact that top scientists have better options in academia. In a baseline model we show that firms do not reward academic outcomes and only hire top scientists when academia is a poor alternative to joining the private sector. We then extent the analysis allowing for asymmetric information about the scientists’ taste for science, a nominal effort constraint and the lack of complementarity between research activities.

Keywords: Contract theory; Intrinsic motivation; Adverse selection; Countervailing incentives (search for similar items in EconPapers)
JEL-codes: D25 D86 J31 O31 O32 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2020-03
New Economics Papers: this item is included in nep-cta and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://hdl.handle.net/10197/9186 First version, 2020 (application/pdf)

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Working Paper: On the firms’ decision to hire academic scientists (2018)
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