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R&D grants and medical innovation

Author

Listed:
  • Unsal, Omer
  • Houston, Reza

Abstract

This paper examines the relationship between government-funded R&D grants in the US and pharmaceutical firm innovation. We find a positive and robust relationship between grant receipt, future patents, and medical innovations. The strength of the relationship between R&D grants and pharmaceutical innovation is attenuated by firm lobbying but strengthened by industry competition, geographic dispersion, and leverage. Investors recognize the unequal value added by grant receipt. R&D grant receipt also impacts future financial performance and sales growth. Our results indicate that the relationship between R&D and innovation is more nuanced than previously identified.

Suggested Citation

  • Unsal, Omer & Houston, Reza, 2024. "R&D grants and medical innovation," Journal of Economics and Business, Elsevier, vol. 128(C).
    • Handle: RePEc:eee:jebusi:v:128:y:2024:i:c:s0148619523000413
    DOI: 10.1016/j.jeconbus.2023.106148
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    Keywords

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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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