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...ract knowledge production.sTo thesextent that abstract knowledge serves as a non-rivalrous input into technological innovation, itssproduction plays a critical role in the process of economic growth (=-=Romer, 1990-=-).sBecausesknowledge production is costly to monitor and subject to expropriation, the level of productionsmay be inefficiently low in the absence of alternative institutions.sOn the one hand, several...

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...omic analysis of knowledge production emphasizes the importance of institutions such assintellectual property, trade secrecy or entry barriers in ensuring the incentives for innovations(Nelson, 1959; =-=Arrow, 1962-=-; Levin et al, 1987; Kremer, 1998), the scientific incentive systemsspecifically rejects non-disclosure, tight control over intellectual property, or monopolization insthe use of novel scientific know...

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...eslaw)?sFinally, computer programmers have increasingly foregone current income to participates26 in the “open software” movement, a choice which may reflect intrinsic preferences or careersconcerns (=-=Lerner and Tirole, 2002-=-).sPerhaps surprisingly, following the seminal study ofsFriedman and Kuznets (1954), there has been almost no systematic economic analysis of thesimpact of professional ethics on labor markets or econ...

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...hile mostseconomic analysis of knowledge production emphasizes the importance of institutions such assintellectual property, trade secrecy or entry barriers in ensuring the incentives for innovations(=-=Nelson, 1959-=-; Arrow, 1962; Levin et al, 1987; Kremer, 1998), the scientific incentive systemsspecifically rejects non-disclosure, tight control over intellectual property, or monopolization insthe use of novel sc...

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...rchers may have preferences for interacting with discipline-specific scientific communitiessand for receiving recognition for their discoveries. Simply put, scientists may have a “taste” forsScience (=-=Merton, 1973-=-; David and Dasgupta, 1994).sWhether such preferences are intrinsic orsreflect long-term career motivations, a scientific “ethic” is critical for the effectiveness ofsScience as an economic institutio...

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...ce is directly incorporated into the model.sFor firm j, thesquality of worker i (the most attractive scientist who applies for a job at firm j) is drawn from asreferred to as communities of practice (=-=Feldman, 1994-=-; Rosenkopf and Tushman, 1998; Almeida and Kogut, 1999).s9 Zucker and Darby (1996) and Zucker, Darby and Brewer (1998) present evidence that biotechnology firms aresmore successful if they employ or i...

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...f panelsdata.sWhile the use of control variables is useful when workers are easily distinguished by observables such asseducational attainment (see, e.g., Hamermesh, 1984; Rosen, 1986; Kostiuk, 1990; =-=Viscusi, 1993-=-), this approach willsbe of limited value if most demographics are unlikely to distinguish individuals (e.g., when there is no variation inseducational attainment among PhD recipients).sAs well, it is...

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...ent context.sNot only is the adoption of Science predicted to covary withsresearcher ability according to the underlying theory, but the distribution of scientific ability isswell-known to be skewed (=-=Stephan, 1996-=-).sThis paper addresses this problem by introducing asnovel empirical methodology exploiting the fact that in job markets for “novice” professionalss(i.e., no prior career-oriented job experience), ma...

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...ceive multiple job offers must besdrawn independently from the distribution of candidates. In particular, individuals with moresoffers may be drawn from a more attractive portion of the distribution (=-=Gibbons and Katz, 1992-=-).sAt one level, this is an empirical question that can be checked directly by comparing the wagesoffers and characteristics of multiple offer candidates and single offer candidates.sIn addition,sdisc...

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... et al, 1987; Kremer, 1998), the scientific incentive systemsspecifically rejects non-disclosure, tight control over intellectual property, or monopolization insthe use of novel scientific knowledge (=-=Dasgupta and David, 1994-=-).2sI therefore defines2 One might also distinguish Science by its locus in universities, its association with general human capitals5 participation in Science to be distinguishable from commercially ...

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...other science-oriented offer and the expected cost to thessharing and incorporate a “rent-splitting” parameter, (0,1)φ∈ , which determines the allocationsof the quasi-rent between scientist and firm (=-=Abowd and Lemieux, 1993-=-; van Reenen, 1996).sAs a result, the second stage wage equilibrium is given by:s* , 0 ( )γ β γ φβ α= + −i j i i S S jw SCIs(3)sEquation (3) describes the empirical relationship between wages and scie...

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...to newsdiscoveries and so may be purchasing a “ticket of admission” which pays itself off in terms ofshigher R&D productivity and a higher rate of technological innovation (Cohen and Levinthal,s1990; =-=Rosenberg, 1990-=-).sAt one level, there is no inherent conflict between these two perspectives on the driverssof the adoption of a scientific orientation.sScientists may value participation in Science (referredsto as ...

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...cience may provide access to new discoveries,simprove the productivity of technological search, and employ codified forms of knowledgeswhich allow for cumulative progress (Fleming and Sorenson, 2003; =-=Foray, 2003-=-).sThus, privatesfirms who would like to exploit novel scientific knowledge must purchase a “ticket ofsadmission” which pays itself off in terms of higher R&D productivity and a higher rate ofstechnol...

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...ction emphasizes the importance of institutions such assintellectual property, trade secrecy or entry barriers in ensuring the incentives for innovations(Nelson, 1959; Arrow, 1962; Levin et al, 1987; =-=Kremer, 1998-=-), the scientific incentive systemsspecifically rejects non-disclosure, tight control over intellectual property, or monopolization insthe use of novel scientific knowledge (Dasgupta and David, 1994)....

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...irical work that has focused on the relationshipsbetween Science and firm performance has confounded the Preference and Productivity effectss(e.g., in the context of the life sciences industries, see =-=Gambardella, 1995-=-; Powell, 1996; Zuckersand Darby, 1996; 1998, and Cockburn, Henderson, and Stern, 1999).sHowever, similar to thisspaper, recent studies highlight the tension within public/private scientific networks ...

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...o receive credit for the intellectualspriority of their scientific discoveries, scientists publicize their findings as quickly as possiblesand retain no formal intellectual property over their ideas (=-=Merton, 1957-=-; Dasgupta and David,s1994).sEach of these features helps to identify Science as an economic institution that is distinctsfrom a commercially-motivated knowledge production system.sFor example, while ...

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...ch, thesmodel abstracts away from some of the more subtle issues which arise in the context of hedonic wage determinationswhen workers’ preferences for nonpecuniary characteristics are heterogeneous (=-=Hwang, et al, 1992-=-), or thesnonpecuniary characteristic has continuous support, all jobs require substantial search, and firms differ in the cost ofsproviding the nonpecuniary benefit (Hwang, et al, 1998).s14 As well, ...

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..., similar to thisspaper, recent studies highlight the tension within public/private scientific networks betweensscientific advance, commercial gains, and career concerns (Owen-Smith and Powell, 2001;s=-=Gittelman and Kogut, 2003-=-; Murray, 2003; Lim, 2003; Murray and Stern, 2003).8sIt is important to note that estimating the economic impact of Science is confounded bysthe selection of more able scientists into science-oriented...

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...s a firm-wide scientific orientation (rather than tailoring the scientific orientation toseach employee), an assumption consistent with prior qualitative and quantitative evidence (Gambardella, 1994;s=-=Zucker and Darby, 1996-=-; Henderson, Cockburn, and Stern, 1999).sfirm-specific distribution, ( )jg γ , bounded below at zero and with mean jγ .12sEach scientist’ssutility depends on the offered wage and the preference for a ...

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...no variation inseducational attainment among PhD recipients).sAs well, it is possible to exploit panel data by including a fixedseffect for each individual and examining the impact of “job switches” (=-=Brown, 1980-=-; Duncan and Holmlund, 1983;sMurphy and Topel, 1987; Abowd, Kramarz, and Margolis, 1999; Entorf and Kramarz, 1998).sHowever, assdiscussed by Gibbons and Katz (1992), job switching is (generally) endog...

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...incorporated into the model.sFor firm j, thesquality of worker i (the most attractive scientist who applies for a job at firm j) is drawn from asreferred to as communities of practice (Feldman, 1994; =-=Rosenkopf and Tushman, 1998-=-; Almeida and Kogut, 1999).s9 Zucker and Darby (1996) and Zucker, Darby and Brewer (1998) present evidence that biotechnology firms aresmore successful if they employ or interact (through copublicatio...

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...For firm j, thesquality of worker i (the most attractive scientist who applies for a job at firm j) is drawn from asreferred to as communities of practice (Feldman, 1994; Rosenkopf and Tushman, 1998; =-=Almeida and Kogut, 1999-=-).s9 Zucker and Darby (1996) and Zucker, Darby and Brewer (1998) present evidence that biotechnology firms aresmore successful if they employ or interact (through copublication) with “star” researcher...

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...on, and Stern, 1999).sHowever, similar to thisspaper, recent studies highlight the tension within public/private scientific networks betweensscientific advance, commercial gains, and career concerns (=-=Owen-Smith and Powell, 2001-=-;sGittelman and Kogut, 2003; Murray, 2003; Lim, 2003; Murray and Stern, 2003).8sIt is important to note that estimating the economic impact of Science is confounded bysthe selection of more able scien...

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...the adoption of Science bysprivate firms.s9 firm of finding another job candidate of similar quality.sThe presence of these competing sources of bargainingspower can yield a rent-sharing equilibrium (=-=Mortensen, 1990-=-; Abowd and Lemieux, 1993; Hwang, et al, 1998).s10 , IV. An Empirical Model of Science and WagessThe wage equation is a function of the Productivity and the Preference parameters, αSsand βS; consisten...

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... exploitation of panelsdata.sWhile the use of control variables is useful when workers are easily distinguished by observables such asseducational attainment (see, e.g., Hamermesh, 1984; Rosen, 1986; =-=Kostiuk, 1990-=-; Viscusi, 1993), this approach willsbe of limited value if most demographics are unlikely to distinguish individuals (e.g., when there is no variation inseducational attainment among PhD recipients)....

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...ions.sOn the one hand, several institutions supporting the production of knowledge (from tradessecrecy to prizes to patents) have been identified and investigated, both theoretically andsempirically (=-=Wright, 1983-=-; Levin et al, 1987).sHowever, the economic consequences of thesinstitution most closely associated with the production of abstract knowledge – Science – havesonly recently begun to be explored (David...

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...compensating differential and the unmeasured correlated between the adoption of scientificspractices and average researcher ability.sWhile prior researchers have acknowledged thespossibility of bias (=-=Henderson and Cockburn, 1994-=-), the results, taken at their face value, suggeststhat these two effects may explain an important portion of the overall measured effect.sIndeed, there may be a conflict between the preferences of re...

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...inseducational attainment among PhD recipients).sAs well, it is possible to exploit panel data by including a fixedseffect for each individual and examining the impact of “job switches” (Brown, 1980; =-=Duncan and Holmlund, 1983-=-;sMurphy and Topel, 1987; Abowd, Kramarz, and Margolis, 1999; Entorf and Kramarz, 1998).sHowever, assdiscussed by Gibbons and Katz (1992), job switching is (generally) endogenous and reflects a popula...

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...ion; in SectionsVI, we provide evidence suggesting that the offers received by these two groups are in fact comparable.s11 attributed such covariation to wealth effects (Weiss, 1976; Sattinger, 1977; =-=Rosen, 1986-=-) or thesimpact of heterogeneous preferences (Hwang et al, 1992), the current application motivates thissbias from the nature of a prestige-based reward system.sOn the other hand, the potential fors“s...

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...el data by including a fixedseffect for each individual and examining the impact of “job switches” (Brown, 1980; Duncan and Holmlund, 1983;sMurphy and Topel, 1987; Abowd, Kramarz, and Margolis, 1999; =-=Entorf and Kramarz, 1998-=-).sHowever, assdiscussed by Gibbons and Katz (1992), job switching is (generally) endogenous and reflects a population ofsindividuals who are badly “matched” for their current positions, leading to a ...

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... jobs require substantial search, and firms differ in the cost ofsproviding the nonpecuniary benefit (Hwang, et al, 1998).s14 As well, this interaction could represent a “reduced-form” income effect (=-=Weiss, 1976-=-; Sattinger, 1977).s15 One could imagine δ as the per-scientist cost of sending scientists to conferences, financing a staff to approvesscientific articles, or the budget for discretionary research ac...

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...he Preference hypothesis.sCardinal DatasWe begin in Table 2 with a simple non-parametric comparison of the variation in salarysoffers by the scientific orientation of different jobs (in the spirit of =-=Card and Sullivan 1988-=-).sForseach of our three principal measures of scientific orientation (PERMIT_PUB, CONTINUEsRESEARCH, and INCENT_PUB), we perform a t-test of differences in the means focusingsexclusively on individua...

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...mong PhD recipients).sAs well, it is possible to exploit panel data by including a fixedseffect for each individual and examining the impact of “job switches” (Brown, 1980; Duncan and Holmlund, 1983;s=-=Murphy and Topel, 1987-=-; Abowd, Kramarz, and Margolis, 1999; Entorf and Kramarz, 1998).sHowever, assdiscussed by Gibbons and Katz (1992), job switching is (generally) endogenous and reflects a population ofsindividuals who ...

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...issbias from the nature of a prestige-based reward system.sOn the other hand, the potential fors“skill bias” from new technologies and the associated bias for productivity studies is wellestablished (=-=Berman, Bound, and Griliches, 1994-=-; Autor, Katz, and Krueger, 1998; Entorf andsKramarz, 1998).sThough Science is not a “technology,” it is an organizational practice moreslikely to be adopted when higher-quality workers are employed.s...

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...dge spillovers, relying on Science may provide access to new discoveries,simprove the productivity of technological search, and employ codified forms of knowledgeswhich allow for cumulative progress (=-=Fleming and Sorenson, 2003-=-; Foray, 2003).sThus, privatesfirms who would like to exploit novel scientific knowledge must purchase a “ticket ofsadmission” which pays itself off in terms of higher R&D productivity and a higher ra...

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... substantial search, and firms differ in the cost ofsproviding the nonpecuniary benefit (Hwang, et al, 1998).s14 As well, this interaction could represent a “reduced-form” income effect (Weiss, 1976; =-=Sattinger, 1977-=-).s15 One could imagine δ as the per-scientist cost of sending scientists to conferences, financing a staff to approvesscientific articles, or the budget for discretionary research activities (e.g., s...

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...cent studies highlight the tension within public/private scientific networks betweensscientific advance, commercial gains, and career concerns (Owen-Smith and Powell, 2001;sGittelman and Kogut, 2003; =-=Murray, 2003-=-; Lim, 2003; Murray and Stern, 2003).8sIt is important to note that estimating the economic impact of Science is confounded bysthe selection of more able scientists into science-oriented firms.sCorrel...