Author(s): Suzanne Scotchmer
Year: 2013
Abstract:
The
Bayh-Dole Act allows universities to exploit patents on their federally
sponsored research. University laboratories therefore have two sources
of funds: direct grants from sponsors and income from licensing. Tax
credits for private R&D also contribute, because they increase the
profitability of licensing. Because Bayh-Dole profits are a source of
funds, the question arises how subsidies and Bayh-Dole profits fit
together. I show that subsidies to the university can either “prime the
pump” for spending out of Bayh-Dole funds, or can crowd it out. Because
of crowding out, if the sponsor wants to increase university spending
beyond the university’s own target, it will end up funding the entire
research bill, just as if there were no profit opportunities under the
Bayh-Dole Act. A subsidy system that requires university matching can
mitigate this problem.
Keywords: research subsidy, tax credits, Bayh-Dole Act, matching grants, crowding out
Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2294913