How much is a Nobel worth?

Nobel laureates on the board bring in the bacon when it is time to capitalize a firm:

WHAT is a Nobel prize really worth? The market values it at $34m, according to a new NBER paper by Matthew Higgins, Paula Stephan and Jerry Thursby. They studied the biotech industry during the 1990s. The industry, in the early part of the decade, was relatively new. The lack of market experience meant there existed few ways to determine the value of fledgling start-ups. Firms had to signal their value and some did so by affiliating with Nobel laureates. The firms advertised the affiliation heavily in their investment prospectuses. The authors of the paper found a Nobel affiliation increased the firm's perceived value (measured by the proceeds from the IPO) by more than $30m.

It seems investment banks viewed the Nobel presence as an indicator of firm value. Biotech firms often performed better when a star scientist was involved. A star presence also encourages other higher quality scientists to join the firm. However, by the mid 1990s, as the biotech industry matured, the Nobel premium seemed to disappear. That could be because other measures of value emerged, such as patents. Or the investors no longer associated Nobel laureates with value. The degree to which the laureate is involved in the firm can vary. Also, often by the time a scientist wins the prize he is less involved with new research. It is also no secret that being a brilliant scientist is not correlated with being a good businessman.

Note that the Nobel laureate in question is not actually given this money -- usually substantially less -- making that the bargain of a century for the firm.