R&D Management in Germany’s High-Tech Industries

The allocation of intellectual property rights between firms and employed researchers causes a principal-agent problem between the two parties. We investigate the working contracts of inven-tors employed by German chemical, pharmaceutical, and electrical engineering firms at the turn of the 20th century and show that some firms were aware of the principal-agent problem and of-fered performance-related compensation schemes to their scientists. However, neither a higher total compensation nor a higher share of variable compensation in total compensation is corre-lated with a higher innovative output. Thus, incentives techniques were already used during the early history of industrial research laboratories, but their impact on innovative output was unsys-tematic. JEL-Classification: N 83, O 31, J 3