The Division of Innovative Labor between Academia and Industry and Pasteur's Quadrant

Abstract

A large literature has explained why it is efficient for universities to focus on basic science and firms to focus on applied science. Yet, in some fields, firms and universities get frequently involved in the same types of research. To understand this disconnect, this paper examines the type of work that firms and universities both undertake. Empirically, it focuses on the research of ninety teams that were involved in simultaneous discoveries straddling the academia-industry boundary. The results indicate that this phenomenon is driven in part by lines of research that belong to Pasteur’s Quadrant — i.e., that are important from both scientific and technological standpoints. The prevalence of such research lines provides a key mechanism explaining university engagement in applied research and firms’ involvement in basic science. The division of innovative labor for this type of work is furthered explored.