Are there Real Effects of Licensing on Academic Research? A Life Cycle View”, NBER Working Paper 11497

Whether financial returns to university licensing divert faculty from basic research is examined in a life cycle context. As in traditional life cycle models, faculty devote more time to research, which can be either basic or applied, early and more time to leisure as they age. Licensing has real effects by increasing the ratio of applied to basic effort and reducing leisure throughout the life cycle, but basic research need not suffer. When applied effort adds nothing to the stock of knowledge, licensing reduces research output, but if applied effort leads to publishable output as well as licenses, then research output and the stock of knowledge are higher with licensing than without. When tenure is added to the system, licensing has a positive effect on research output except when the incentives to license are very high. ∗Order of authors is reverse alphabetical. We thank Josh Lerner and participants of the NBER Workshop on Academic Entreprenuership for comments. We gratefully acknowledge financia