A Stochastic Life Cycle Model of Academic Research and Patent Licensing

We extend the literature on life cycle behavior of faculty researchers by assuming two knowledge stocks, scientific (free to all) and patentable (appropriable). Faculty derive utility from research effort, leisure, prestige in knowledge accumulation, and income. Faculty with a strong preference for one type of research tend to devote more time to it, but if the knowledge stock associated with it grows fast enough, then they reallocate time from more or less preferred research later in the life cycle. Both knowledge stocks matter to utility, so if one grows sufficiently larger, the marginal utility from an increase in the other becomes greater, implying this time reallocation. An increase in license income, such as from the Bayh-Dole Act, increases in time in applied research, but faculty do this by decreasing their time in leisure first, then their time in basic research. Thus, the scientific knowledge stock is not always smaller as a result of this type of legislation. The primary effect of spillovers of the Pasteur's Quadrant type is to increase the scientific knowledge stock, but faculty effort in basic research need not decrease, and may increase.