Patent Value and R&D Competition
AbstractThis paper aims at characterizing the dynamics of R&D competition within the pharmaceutical domain, focusing on the role of patent disclosure, the extent of uncertainty, and role of scientific advances. Following the empirical literature in the economics of innovation, we employ patents as a proxy for innovations and patent citations as a measure of knowledge utilization and spillovers. Pharmaceuticals are a unique setting in this respect, given the characteristics of the innovation process, that make patents an important means for appropriating returns from R&D. All in all, the analysis provides evidence that in the pharmaceutical industry research advances through a process of trial-and-error, where both successes and failures set the ground for subsequent innovations. The disclosure of the information about new compounds or new mechanisms of action play an important role in this industry fostering R&D efforts and competition in identified therapeutic markets in the search for new marketable products building both on failures and successes. The outcome of this process is highly uncertain and building on a success provides no certainty about the outcome of the search. Indeed, discontinued patents building on previous failures exhibit a higher citation rate. We also contribute to the debate about the relevance of citation in measuring patent value by looking at the relationship between patent citations and product sales.
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Bibliographic InfoPaper provided by University of Verona, Department of Economics in its series Working Papers with number 51.
Date of creation: Oct 2008
Date of revision:
Patent disclosure; innovation; R&D competition;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-AGE-2008-11-04 (Economics of Ageing)
- NEP-ALL-2008-11-04 (All new papers)
- NEP-EEC-2008-11-04 (European Economics)
- NEP-HEA-2008-11-04 (Health Economics)
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- Fabio Pammolli & Nicola Carmine Salerno, 2011. "Le differenze regionali nella governance della spesa sanitaria - SaniRegio-2011," Working Papers 02-2011, Competitività Regole Mecati (CERM).
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