How and Why Does Knowledge Spill Over? The Case of Biotechnology

Abstract

This paper sheds light on the questions, Why does knowledge spill over? and How does knowledge spill over? The answer to these questions lies in the incentives confronting scientists to appropriate the expected value of their knowledge considered in the context of their path-dependent career trajectories. In particular, we focus on (1) the ability of scientists to appropriate the economic value embodied in their human capital, (2) the incentive structure facing scientists either to remain in their existing institution or start a new firm, and (3) whether scientists choose to commercialize their knowledge by remaining in existing firms or by starting a new firm. A hazard model is estimated to link characteristics specific to the scientist to the decision to start a new biotechnology firm. We conclude that the spillover of knowledge from the source creating it, such as university, research institute, or industrial corporation, to a new-firm start-up facilitates the appropriation of knowledge for the individual scientist(s) but not necessarily for the organization creating that knowledge.

JEL Classification: L0, O1, O3