Incentives for technology transfer institutes

Public funding is legitimised by underinvestment in absorptive capacity and coordination problems in matching demand and supply of knowledge. Currently, the amount of public funding is not conditional upon pre-specified and measurable performance indicators. This indicates a risk of ineffectivity and inefficiency. We present an indicator - constrained contract research turnover - that seems to be a good measure for the social value added technology transfer institutes are expected to deliver. The constraint refers to the following condition: ineligible is contract research turnover that builds on a knowledge base that, according to an independent expert committee, is (or could have been) created and maintained by private technology transfer firms.

We discuss a policy option that makes public funding contingent on this indicator. We compare this policy option with an alternative that attaches incentives to a throughput measure of performance, respectively that applies implicit rather than explicit incentives to enhance effectivity and efficiency.