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Abstract
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Universities are an important actor for innovation. Their contributions to technological and
scientific knowledge development have been supported by various types of funding. The current
study investigates the impacts of two academic research funding sources—industry and
competitive—on academic patents. We measure the effects with two indicators—creation of
progenitor inventions and the degree of diffusion. Using a patent database, this paper identifies
a progenitor invention if a patent is granted without any backward citations and measures
the degree of diffusion with patent citations. Focusing on Japanese university patents, the
main finding of this paper is that competitive funding tends to produce progenitor inventions
whereas industry funding is not likely to do so. By contrast, inventions produced from competitive
funding are not likely to diffuse, whereas those produced from industry funding are
likely to diffuse. Based on our findings, we argue that the competitive funding may work better
when diffusion mechanism is introduced. An example is to increase academic researchers’
proximity to the industry. Additionally, our findings also imply that when setting new funding
or changing academic funding system such as replacing block funding with other types, it is
important to understand what kind of outcomes are expected from the funding method.
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