Early firm engagement, government research funding, and the privatization of public knowledge

Early firm engagement in the scientific discovery process in public institutions is an important form of science-based innovation. However, early firm engagement may negatively affect the academic value of public papers due to firms’ impulse to privatize public knowledge. In this paper, we crawl all patent and paper text data of the Distinguished Young Scholars of the National Science Foundation of China (NSFC) in the chemical and pharmaceutical field. We use semantic recognition techniques to establish the link between scientific discovery papers and patented technologies to explore the relationship between the quality of public knowledge production, government research funding, and early firm engagement in the science-based innovation process. The empirical results show that, first, there is a relatively smooth inverted U-shaped relationship between government research funding for scholars and the quality of their publications. An initial increase in government research funding positively drives the quality of public knowledge production, but the effect turns negative when research funding is excessive. Second, government research funding for scholars can act as a value signal, triggering the firm’s impulse to privatize high-value scientific discoveries. Hence, early firm engagement moderates the inverted U-shaped relationship such that at low levels of research funding, early firm engagement can improve the quality of public knowledge production, and at high levels of research funding, early firm engagement can further reduce the quality of public knowledge production.