Signaling and the Ownership of Academic Patents

Although in most countries, professors are legally obligated to disclose their inventions to their university\'s technology transfer office, the latter often does not have the real authority to enforce this rule. We here introduce a model that endogenizes a professor\'s decision of a form of transfer for her idea. If she does not disclose the idea to the transfer office, she still faces, on her own, both the difficulty of identifying a good match for her technology with a company and the incomplete information of the company on the quality of her idea. She can, however, signal that quality to the company at some cost which is decreasing with quality. We find four types of pure strategy equilibria of this signaling game. Taking these four types of equilibria into account, the model predicts that the company ownership of academic patents are associated with higher patent quality, greater inventor experience in technology transfer, and lower technology transfer office experience. We estimate the model and confirm its predictions on an original sample of 1,260 patent-professor pairs built on UK data. Specific attention is paid to the control of various forms of potential reverse causality of the type of patent applicant on patent quality.