Here is a new economics paper that might be of interest to Gordon and the rest of you out there interested in law & entrepreneurship: Azoulay et al., "Incentives and Creativity: Evidence from the Academic Life Sciences". Here is the abstract:
Despite its presumed role as an engine of economic growth, we know surprisingly little about the drivers of scientific creativity. In this paper, we exploit key differences across funding streams within the academic life sciences to estimate the impact of incentives on the rate and direction of scientific exploration. Specifically, we study the careers of investigators of the Howard Hughes Medical Institute (HHMI), which tolerates early failure, rewards long-term success, and gives its appointees great freedom to experiment; and grantees from the National Institutes of Health, which we are subject to short review cycles, pre-defined deliverables, and renewal policies unforgiving of failure. Using a combination of propensity-score weighting and difference-in-differences estimation strategies, we find that HHMI investigators produce high-impact papers at a much higher rate than two control groups of similarly-accomplished NIH-funded scientists. Moreover, the direction of their research changes in ways that suggest the program induces them to explore novel lines of inquiry.
What might this mean for law? Shooting from my hip, it might imply that companies that are subject to short-term pressures to produce (either because of the types of investors, the incentives of managers, or incentives created by corporate law) might produce less long term innovation. Any thoughts, Gordon, on what might be the results of a study of similar start-up companies backed by v.c. funds with different horizons?
What might this mean should law firms invest more in r&d? The best results may require a longer gestation.
Something for scholars to think about too in our own scholarship.
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