Research universities funded by governments, non-profits, for-profits, and internal resources generate ideas. It also considers how the differences in the incentive structure with black and red boxes create a role of university research. This Article examines the practices that have emerged after the Bayh-Dole Act’s grant of intellectual property rights to universities for the results of federally funded research and the many constraints imposed by university structure. Because successful commercialization of the product of research requires entrepreneurship, we use the insights into entrepreneurship of economists Joseph Schumpeter and Israel Kirzner to begin to unpack the red box of university commercialization efforts. As a result, the process of moving inventions from the university to the market usually occurs through licensing innovations to firms that have a comparative advantage in assessing possible market value of inventions and can risk capital to exploit innovations. In this Article, we argue that research in non-profit universities is distinct from research in a for-profit firm. universities, contrary to the Bayh-Dole Act’s promise that it would produce a massive technology transfer from universities to the marketplace. Using a comprehensive set of patent data, we show that university patenting is largely the result of activity by a tiny subset of U.S. They represent an alternative (which we term the “red box”) to research that occurs within firms’ black boxes, an alternative with specific advantages and disadvantages in producing innovations. Economically valuable research also emerges from non-profit universities. ![]() Firms are not the only source of innovation, however. As a result, the factors that enable wealth creation within the black boxes of firms, a key factor in economic progress, are little understood. Firms take in resources and produce innovations but why firms are successful at innovation is unspecified. Despite Coase’s insight, economists often treat firms as black boxes with respect to innovation. The allocation of activities depends on the relative costs of organizing activities within the firm versus direct reliance on the market. In The Nature of the Firm, Ronald Coase explains how firms represent a suspension of the market mechanism. ![]() ![]() Meiners **ĭownload a PDF version of this article here.
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