Essays on the horizontal (mis)alignment of incentives and the direction of innovation efforts

Blomfield, Michael (2020) Essays on the horizontal (mis)alignment of incentives and the direction of innovation efforts. Doctoral thesis, University of London: London Business School.

Abstract

Scientific knowledge production and commercialization involves a range of actors, each bringing valuable resources to these processes. Beyond organizations' boundaries, these include academic scientists with knowledge, investors providing capital, and government funding scientific research and setting the rules shaping how it is commercialized. However, these actors' interests can diverge from those of a focal organization in where and how to generate value from their resources. They may be exposed to a more diverse range of incentives compared to product market firms, raising additional challenges to firms working with them to develop knowledge. This dissertation analyzes how the direction of organizations' innovative activity can be affected by its interactions with these actors. The first paper shows how scientists' competing reputational interests can limit the effectiveness of organizations' intended incentives when funding external academic scientists to develop knowledge in an area of interest to the organization. It shows that the interplay of reputational rewards and access to resources is crucial to understanding how organizations can effectively incentivize academic scientists to apply their knowledge to topics of interest. It notes how this misalignment can have important unintended effects and risks being especially pronounced when firms seek to work with the most capable scientists. The second paper examines how different incentives in academic and industry science affect the type of human capital scientists are incentivized to develop. It analyzes the consequences of this for the firms that exploit their specialized knowledge and skills by hiring scientists from academia. The final paper examines how investors in a firm, as capital resource providers, that also own equity in its rivals can have competing interests in where a firm focuses knowledge development efforts, the channels through which this may subtly affect managers' private interests when making innovation investments, and simple mechanisms that can mitigate this misalignment.