Reluctance to pursue breakthrough research: A signaling explanation

The current state of scientific research is disappointing due to the lack of significant breakthroughs, despite an ever-increasing number of publications and substantial resources invested in R&D activities. This paper proposes a signaling model as a complementary explanation to this phenomenon. If managers of research institutions can observe publications but are unable to observe breakthrough innovations, low-skilled scholars might reduce their investment in exploratory research and instead invest time in publishing as many papers as high-skilled scholars. This would allow them to claim the same level of compensation. In response to the imitation by low-skilled scholars, high-skilled scholars would publish even more, reaching a point where low-skilled scholars would abandon the imitation strategy. This mechanism leads to an equilibrium with (1) insufficient investment in exploratory research by high-skilled scholars, (2) excessive focus on publishing papers, (3) reduced effectiveness of resource-based incentives for exploratory research, and (4) reduced effectiveness of reward-based incentives for research.