Abstract
Should knowledge creation be publicly or privately funded? This paper studies the shift in the U.S. innovation system towards the patentability and commercialization of the basic-research happened during the early 1980s. We interpret this change as rendering scientists and researchers responsive to “market” forces. Before 1980, universities researched by employing scientists motivated by “curiosity.” After 1980, scientists could patent their research and universities could behave as private firms. In a context of two-stage inventions (basic and applied research), this reform has a priori ambiguous effects on innovation and welfare. We build a Schumpeterian growth model and match it to the data to assess this critical turning point from the innovation and welfare perspectives.
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