This paper presents a behavioral model of an inventor's contractual choice in which (a) newly established organized research is formulated to be an endogenous outcome of this choice, and (b) the value of the inventor's inventive ingenuity or ability is conceptually defined. We hypothesize that the difficulty of appropriating the returns to basic knowledge is a reason why inventors form research organizations. The main implication of the model is that inventors with a higher inventive ability have a greater incentive to organize research. The career patent records of sixty-three poineering inventors, profiled in Jewkes, Sawers and Stillerman's Sources of Invention, are examined. The data is consistent with the implication of our model: We find that inventors with a high index of inventive ability are more likely to be affiliated with organized research. © 1993.
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