Economic Effects of the Co-Evolution of Universities and Firms: Tacit and Deeded Knowledge Protection and Acquisition

The Merage School of Business Colloquium 

Beall Center for Innovation and Entrepreneurship

Lynne G. Zucker
UCLA Department of Sociology

Friday, April 29th

12:00 - 1:30pm
Merage School of Business Room 112
Light lunch served at 12:00pm

Strategies and incentives of firms behave like “genes” in providing a framework or set of recipes for reaching organizational objectives; the expression of these genes occurs in the skills that employees have. Near the knowledge frontier, the skills are often based on highly tacit knowledge and are difficult to learn without working directly with other scientists who already have these skills. As on-going discoveries are made, nearly continuous learning of this hands-on type is required, pressuring scientists in existing organizations to update knowledge and skills. We report preliminary evidence that those scientists who cross the firm-university boundary in their collaborations or personal employment histories are subsequently much more productive in patenting and in publishing than fellow employees, whether currently working in a firm or in a university. These skills (patenting- and publishing-related) are synergistic, with production of one skill set often producing more new discoveries and resources that are valuable to the production of the other.

Tacit knowledge also affects the ability of pre-existing organizations to acquire access to the new knowledge. When knowledge is sufficiently discontinuous, new firms are born in response, built around those scientists who have the new skills, while existing organizations must recruit or re-train to acquire skills needed for conversion. The value of tacit knowledge when observable and easily copied by others may be rapidly competed away, but if learning by doing is required to gain the knowledge, then it may be naturally excludable such that training by the scientist(s) who made the discovery may be required initially and this ability to do hands-on training to others may only gradually spread to others. We have found significant positive effects of tacit or defacto intellectual property rights on number of patents granted (deeded rights) and on number of products in development, and also find roughly equal effects of defacto and deeded rights on financial success of firms. These findings argue strongly for including both tacit-based rights and deeded rights in models predicting financial and other success.