Designing Efficient Institutions for Science-Based Entrepreneurship: Lesson from the US and Sweden

The recent ‘scientification’ of commercial technology has brought the interface between universities and industry into sharp focus. In particular, academic entrepreneurship, i.e., the variety of ways in which academics take direct part in the commercialization of research, is widely discussed. The purpose of this paper is to suggest a framework for identifying the strategic individual decisions involved when educational choice is translated into science-based entrepreneurship. Identifying these decisions also allows us to hypothesize what incentive structures should be crucial. Our suggested framework is informally tested by an in-depth examination of the experiences of Sweden and the US. Despite large levels of R&D spending and comprehensive government support schemes, science-based entrepreneurship has been far less important in Sweden compared to the US. Our analysis points to weaknesses in the Swedish incentive structure in key respects: the rate of return to human capital investment, incentives to become an entrepreneur and to expand existing businesses, and insufficient incentives within the university system to adjust curricula and research budgets to outside demand. Several policy measures during the 1990s have reduced the weaknesses in the Swedish incentive structure. The current emergence of a more vibrant entrepreneurial culture in Sweden in some areas is consistent with these changes. Our analysis suggests that a policy aimed at encouraging science-based entrepreneurship should focus on strengthening individual incentives for human capital investment and entrepreneurial behavior both within universities and in business. JEL Classification: J24, O31, O32, O57.