It is important to understand that discovery, invention and innovation have very different incentive systems. Moreover, these differences create problems in transfer from one activity to another. For example, the culture for discovery and invention are very different and transfer between the two activities requires incentives.
a. Discovery: Fame. Scientists want to become famous. Such fame brings them both praise and wealth. With fame as an incentive system scientists have powerful incentives to immediately broadcast their results, thus creating a free flow of ideas. This means that researchers have at their disposal all the current results in conducting their ongoing research. However, fame does not create a sufficient financial incentive for funding basic research.
b. Invention: Intellectual property. There are three important forms of intellectual property: Patents, copyright, and trade secrets. Without property rights rivals would immediately copy inventions and the producer with the lowest costs would claim the financial reward. Incentives to invent would be diminished. However, the creation of a socially efficient form of intellectual property rights is difficult because such rights can grant excessive monopoly rights and create an atmosphere of secrecy which impedes the free flow of ideas.
Intellectual property law is upgraded over time to create better incentives in changing economic conditions. For example, copyright which originally was for books, plays and other literary works has been extended to software and integrated circuit masks. In the US, a patent is issued to the first to discover, not the first to file. As you might expect this leads to endless law suits. Bell's patent for the telephone is an example. Currently, there is a debate whether patents should be issued to the first to file, which is the practice in the rest of the world.
c. Innovation: Better performance. There are no property rights for innovation; consequently, imitators immediately copy any promising innovation. Imitation has become more important in the private sector with increasing international competition. The new buzz word is ``benchmarking'' which means to compare the firm's procedures with the best practice in the world.