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The impact of public basic research on industrial innovation: Evidence from the pharmaceutical industry

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  • Toole, Andrew A.

Abstract

While most economists believe that public scientific research fuels industry innovation and economic growth, systematic evidence supporting this relationship is surprisingly limited. In a recent study, Acemoglu and Linn (2004) identified market size as a significant driver of drug innovation in the pharmaceutical industry, but they did not find any evidence supporting science-driven innovation from publicly funded research. This paper uses new data on biomedical research investments by the U.S. National Institutes of Health (NIH) to examine the contribution of public research to pharmaceutical innovation. The empirical analysis finds that both market size and NIH funded basic research have economically and statistically significant effects on the entry of new drugs with the contribution of public basic research coming in the earliest stage of pharmaceutical drug discovery. The analysis also finds a positive return to public investment in basic biomedical research.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:respol:v:41:y:2012:i:1:p:1-12 DOI: 10.1016/j.respol.2011.06.004
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    Cited by:

    1. Yi Zhang & Mingting Kou & Kaihua Chen & Jiancheng Guan & Yuchen Li, 2016. "Modelling the Basic Research Competitiveness Index (BR-CI) with an application to the biomass energy field," Scientometrics, Springer;Akadémiai Kiadó, vol. 108(3), pages 1221-1241, September.
    2. Dirk Czarnitzki & Christian Rammer & Andrew Toole, 2014. "University spin-offs and the “performance premium”," Small Business Economics, Springer, vol. 43(2), pages 309-326, August.
    3. Ryan, James Christopher & Berbegal-Mirabent, Jasmina, 2016. "Motivational recipes and research performance: A fuzzy set analysis of the motivational profile of high performing research scientists," Journal of Business Research, Elsevier, vol. 69(11), pages 5299-5304.
    4. Mark Pauly & Kyle Myers, 2016. "A Ricardian-Demand Explanation for Changing Pharmaceutical R&D Productivity," NBER Working Papers 22720, National Bureau of Economic Research, Inc.
    5. Beck, Mathias & Junge, Martin & Kaiser, Ulrich, 2017. "Public Funding and Corporate Innovation," IZA Discussion Papers 11196, Institute for the Study of Labor (IZA).
    6. Kolympiris, Christos & Kalaitzandonakes, Nicholas & Miller, Douglas, 2014. "Public funds and local biotechnology firm creation," Research Policy, Elsevier, vol. 43(1), pages 121-137.
    7. David Popp, 2015. "Using Scientific Publications to Evaluate Government R&D Spending: The Case of Energy," CESifo Working Paper Series 5442, CESifo Group Munich.
    8. Schetter, Ulrich & Gersbach, Hans & Schneider, Maik, 2013. "Taxation, Innovation and Entrepreneurship," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79776, Verein für Socialpolitik / German Economic Association.
    9. Gersbach, Hans & Schetter, Ulrich & Schneider, Maik, 2015. "How Much Science? The 5 Ws (and 1 H) of Investing in Basic Research," CEPR Discussion Papers 10482, C.E.P.R. Discussion Papers.
    10. repec:spr:scient:v:111:y:2017:i:2:d:10.1007_s11192-017-2324-z is not listed on IDEAS
    11. Bastian Rake, 2017. "Determinants of pharmaceutical innovation: the role of technological opportunities revisited," Journal of Evolutionary Economics, Springer, pages 691-727.
    12. repec:spr:scient:v:111:y:2017:i:3:d:10.1007_s11192-017-2357-3 is not listed on IDEAS
    13. David Popp, 2015. "Using Scientific Publications to Evaluate Government R&D Spending: The Case of Energy," NBER Working Papers 21415, National Bureau of Economic Research, Inc.
    14. Park, Hyunwoo & Lee, Jeongsik (Jay) & Kim, Byung-Cheol, 2015. "Project selection in NIH: A natural experiment from ARRA," Research Policy, Elsevier, vol. 44(6), pages 1145-1159.
    15. Manuel I. Hermosilla & Jorge A. Lemus, 2017. "Therapeutic Translation in the Wake of the Genome," NBER Working Papers 23989, National Bureau of Economic Research, Inc.
    16. Margaret Blume-Kohout & Krishna Kumar & Christopher Lau & Neeraj Sood, 2015. "The effect of federal research funding on formation of university-firm biopharmaceutical alliances," The Journal of Technology Transfer, Springer, vol. 40(5), pages 859-876, October.
    17. repec:nbr:nberch:13988 is not listed on IDEAS
    18. Prettner, Klaus & Werner, Katharina, 2016. "Why it pays off to pay us well: The impact of basic research on economic growth and welfare," Research Policy, Elsevier, vol. 45(5), pages 1075-1090.
    19. Felipa de Mello-Sampayo & Sofia de Sousa-Vale & Francisco Camoes, 2015. "Substitutability Between Drugs, Innovation, and Fiscal Policy in the Pharmaceutical Industry," Annals of Economics and Finance, Society for AEF, vol. 16(2), pages 273-289, November.
    20. repec:spr:jahrfr:v:37:y:2017:i:2:d:10.1007_s10037-017-0118-7 is not listed on IDEAS

    More about this item

    Keywords

    R&D; NIH; Social return; Biomedical; Research lags; Public science; New molecular entities;

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health

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