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Does Public Scientific Research Complement Private Investment in Research and Development in the Pharmaceutical Industry?

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  • Toole, Andrew A

Abstract

This paper analyzes how pharmaceutical research and development (R&D) investment responds to publicly supported biomedical research performed mainly at universities and nonprofit institutions. New microlevel data on investment, by the U.S. National Institutes of Health, allow measures of public basic and clinical research in seven medical classes to be included in a distributed lag model explaining pharmaceutical R&D investment. Using a panel of medical classes observed over 18 years, the analysis found strong evidence that public basic and clinical research are complementary to pharmaceutical R&D investment and thereby stimulate private-industry investment. However, differences in the relevance and degree of scientific and market uncertainty between basic and clinical research lead to differences in the magnitude and timing of the pharmaceutical investment response.

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  • Toole, Andrew A, 2007. "Does Public Scientific Research Complement Private Investment in Research and Development in the Pharmaceutical Industry?," Journal of Law and Economics, University of Chicago Press, vol. 50(1), pages 81-104, February.
    • Handle: RePEc:ucp:jlawec:y:2007:v:50:i:1:p:81-104
    DOI: 10.1086/508314
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    Cited by:

    1. Philippe Aghion & Ufuk Akcigit & Antonin Bergeaud & Richard Blundell & David Hemous, 2019. "Innovation and Top Income Inequality," Review of Economic Studies, Oxford University Press, vol. 86(1), pages 1-45.
    2. Margaret K. Kyle, 2019. "The Alignment of Innovation Policy and Social Welfare: Evidence from Pharmaceuticals," NBER Chapters, in: Innovation Policy and the Economy, Volume 20, pages 95-123, National Bureau of Economic Research, Inc.
    3. Chen, Sheng-Syan & Chen, Yan-Shing & Liang, Woan-lih & Wang, Yanzhi, 2020. "Public R&D spending and cross-sectional stock returns," Research Policy, Elsevier, vol. 49(1).
    4. Kyle, Margaret K. & Ridley, David B. & Zhang, Su, 2017. "Strategic interaction among governments in the provision of a global public good," Journal of Public Economics, Elsevier, vol. 156(C), pages 185-199.
    5. Bastian Rake, 2017. "Determinants of pharmaceutical innovation: the role of technological opportunities revisited," Journal of Evolutionary Economics, Springer, vol. 27(4), pages 691-727, September.
    6. Beck, Mathias & Junge, Martin & Kaiser, Ulrich, 2017. "Public Funding and Corporate Innovation," IZA Discussion Papers 11196, Institute of Labor Economics (IZA).
    7. García-Romero, Antonio & Escribano, Álvaro & Tribó, Josep A., 2017. "The impact of health research on length of stay in Spanish public hospitals," Research Policy, Elsevier, vol. 46(3), pages 591-604.
    8. Thomas H. W. Ziesemer, 2021. "The Effects of R&D Subsidies and Publicly Performed R&D on Business R&D: A Survey," Hacienda Pública Española / Review of Public Economics, IEF, vol. 236(1), pages 171-205, March.
    9. Gianluca Fabiano & Andrea Marcellusi & Giampiero Favato, 2020. "Public–private contribution to biopharmaceutical discoveries: a bibliometric analysis of biomedical research in UK," Scientometrics, Springer;Akadémiai Kiadó, vol. 124(1), pages 153-168, July.
    10. Raphaël Godefroy, 2010. "The birth of the congressional clinic," Working Papers halshs-00564921, HAL.
    11. Toole, Andrew A., 2012. "The impact of public basic research on industrial innovation: Evidence from the pharmaceutical industry," Research Policy, Elsevier, vol. 41(1), pages 1-12.
    12. Toole, Andrew A. & King, John L., 2011. "Industry-science connections in agriculture: Do public science collaborations and knowledge flows contribute to firm-level agricultural research productivity?," ZEW Discussion Papers 11-064, ZEW - Leibniz Centre for European Economic Research.
    13. Shawn Kantor & Alexander Whalley, 2009. "Do Universities Generate Agglomeration Spillovers? Evidence from Endowment Value Shocks," NBER Working Papers 15299, National Bureau of Economic Research, Inc.
    14. Kyle, Margaret K., 2022. "Incentives for pharmaceutical innovation: What’s working, what’s lacking," International Journal of Industrial Organization, Elsevier, vol. 84(C).
    15. Rong, Zhao & Wu, Binzhen, 2020. "Scientific personnel reallocation and firm innovation: Evidence from China’s college expansion," Journal of Comparative Economics, Elsevier, vol. 48(3), pages 709-728.
    16. Office of Health Economics, 2010. "Enhancing the Benefits from Biomedical and Health Research Spillovers," Occasional Paper 000217, Office of Health Economics.
    17. Office of Health Economics, 2010. "Innovation in Medicines: Can We Value Progress?," Seminar Briefing 000219, Office of Health Economics.
    18. Czarnitzki, Dirk & Toole, Andrew A., 2006. "Business R&D and the Interplay of R&D Subsidies and Market Uncertainty," ZEW Discussion Papers 06-055, ZEW - Leibniz Centre for European Economic Research.
    19. Toole, Andrew A., 2011. "The impact of public basic research on industrial innovation: Evidence from the pharmaceutical industry," ZEW Discussion Papers 11-063, ZEW - Leibniz Centre for European Economic Research.
    20. Lei Kong, 2020. "Government Spending and Corporate Innovation," Management Science, INFORMS, vol. 66(4), pages 1584-1604, April.
    21. Steliana Sandu & Cristina Modoran, 2008. "The Impact Of R&D Investment On Productivity," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(10), pages 1-18.
    22. Bhaven Sampat, 2022. "Second World War and the direction of medical innovation," WIPO Economic Research Working Papers 70, World Intellectual Property Organization - Economics and Statistics Division.
    23. Dirk Czarnitzki & Andrew Toole, 2007. "Business R&D and the Interplay of R&D Subsidies and Product Market Uncertainty," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 31(3), pages 169-181, November.
    24. Rebecca McKibbin & Bruce A. Weinberg, 2021. "Does Research Save Lives? The Local Spillovers of Biomedical Research on Mortality," NBER Working Papers 29420, National Bureau of Economic Research, Inc.
    25. Deepak Hegde & Bhaven Sampat, 2015. "Can Private Money Buy Public Science? Disease Group Lobbying and Federal Funding for Biomedical Research," Management Science, INFORMS, vol. 61(10), pages 2281-2298, October.

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