Incentives for employed inventors: an empirical analysis with special emphasis on the German Law for Employee's Inventions

This paper evaluates the use of incentive systems in R&D to stimulate the motivation potential of R&D personnel. Special emphasis is given to the German Employee's Inventions Act, enacted in 1957 which is applicable to all enterprises under German law and provides guidelines for a mandatory compensation of employed inventors. The law's major content, its advantages and disadvantages are presented and discussed in detail. It is shown that the general consensus in industry is unfavourable to the German Act. A significant time lack between the invention and it's compensation, the lack of transparency of the compensation guidelines, the calculation of an adequate compensation level, and a high administrative effort of calculating the compensation are only some of the drawbacks of this law. The consequences of these problems are the encouragement of secrecy among R&D professionals and the negative impact on their individual motivation potential. We also report on an experiment that measures the individual preferences of R&D personnel for different incentive variables. The method of conjoint measurement is applied to this area, it's technique is described and assessed. It is found that different segments of respondents with different preferences exist. The empirical findings also indicate the need to increase the flexibility of existing incentive systems in German industry.