Robert F. Owen

Optimal incentives for income-generation in universities: the rule of thumb for the Compton tax

Abstract In this paper we propose a novel framework to model one of the key links between universities and industry—the undertaking of applied research. We postulate that a basic objective of universities is to undertake fundamental research and that they receive public funding to do so. Nevertheless, faced with tight budget constraints, universities may have incentives to allow their staff to devote some of their time to income-generating activities such as applied research or consultancy. This opens up two channels by which universities can ease their budget constraint: (i) by allowing academics to supplement their income, universities may be able to hold down academic salaries; (ii) universities can effectively ‘tax’ the income that academics raise through applied research or consultancy—for example, through the imposition of ‘overhead charges’. By easing their budget constraint, universities may be able to take on sufficient extra staff to more than offset the time that existing staff are spending on non-fundamental research and thus increase the amount of fundamental research that they can achieve with a given public budget. We develop a model of this link between universities and firms and use it to determine the optimal ‘tax’ that universities should impose on applied-research income. The Compton tax, used at MIT in the 1930s, is an early example of the use of this instrument.

Sunk Costs, Market Access, Economic Integration, and Welfare

The nature of the equilibrium that arises after economic integration is shown to depend crucially on how initial entry costs are divided along two separate dimensions: market access versus technology costs, and fixed versus sunk costs. There are three post-integration equilibrium regimes: a traditional trade theory regime which arises when both market access costs and fixed costs are small, a new trade theory regime which arises when market access costs are small but fixed costs are high, and a market access regime which arises when market access costs are high. While the first two regimes have already appeared in the literature, the third is new. The sign, magnitude, and qualitative behavior of the welfare effects of integration across all three regimes depend on the configuration of these costs. Copyright 2002 by Blackwell Publishing Ltd.

ICT and Regional Economic Dynamics : A Literature Review

The objective of this report is to review the relevant theoretical and empirical literature to provide a conceptual and methodological background for the analysis of the consequences of ICT use and globalisation on the regional economies in the European Union. We highlight the key aspects of ICT as a general purpose technology, discuss the economic impacts of ICT diffusion from macro and micro perspectives, and examine the spatial consequences of ICT diffusion. We focus on regional innovation systems and globalisation in order to propose an organizing framework for the analysis of the impact of ICT diffusion on regional development.

Racing in Two Dimensions

In this paper we study an industry in which there is an ongoing sequence of R&D races between two firms. Firms are engaged in product innovation. Products are horizontally and vertically differentiated. There are two key characteristics/dimensions to products, and the level at which these are embodied in products can be increased by R&D. At each time firms can spend R&D on improving their product in one or both dimensions. We allow the possibility of economies scope — so R&D undertaken in one dimension can spillover to the other. The question we are interested in is whether a firm that is ahead in a single dimension but behind in another will focus all its R&D effort in the area in which it is ahead (product specialisation), or whether it will try to do R&D in both dimensions in the hope that it might get ahead in both and end up with a superproduct that dominates in both characteristics. The outcome of this R&D competition determines a Markov transition probability matrix determining the evolution of the industry. We show that when the R&D technology is characterized by constant returns then the only steady-state outcome is one in which the economy stays forever in a position in which one firm produces a super-product and the other gives up doing R&D altogether. This outcome is unaffected by the degree of economies of scope. When the R&D technology is characterised by decreasing returns, then the industry will visit all states and so will exhibit both product specialisation and superproduct dominance at various times. Now the extent of economies of scope matters and we show that the greater the extent of economies of scope, the less likely is the industry to exhibit product dominance, and the more likely it is to exhibit product specialisation.

Governance and economic integration: Stakes for Asia

This paper assesses the nexus between changes in governance structures—at national and cooperative international levels—and evolutionary processes of economic integration in light of regional policy targets in Asia. The analysis highlights the importance of improved governance as an essential condition for effectively attaining an “Asian Economic Community†while arguing that the experience of the European Union (EU) offers valuable insights regarding the process of integration.

A Model of International Entry and Exit with Endogenous Sunk Costs in Vertical Markets

This chapter introduces the Cournot framework with endogenous sunk costs to extend traditional models of vertical markets in international trade. This is done by introducing market access costs as highlighted by Owen and Ulph (Rev Int Econ 1093:539–555, 2002). The authors develop a baseline and benchmark model to examine the strategic role of access costs as endogenous sunk costs by incumbents for forestalling entry. In the model, foreign entry in the downstream and domestic retail market under incomplete information is examined. Incumbent firms are fully informed about the cost of production as well as their chosen market access costs while the foreign (potential) entrant does not possess the full information on costs. The incumbents select a pre-entry price while potential entrant infers the cost conditions from price statistic.