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The Value of Failures in Pharmaceutical R&D

Author

Listed:
  • Jing-Yuan Chio

    (IMT School for Advanced Studies Lucca)

  • Laura Magazzini

    (Department of Economics, University of Verona)

  • Fabio Pammolli

    (IMT School for Advanced Studies Lucca and CERM Foundation)

  • Massimo Riccaboni

    (IMT School for Advanced Studies Lucca and Department of Managerial Economics, Strategy and Innovation, K.U. Leuven)

Abstract

We build a cumulative innovation model in which both success and failure provide valuable information for future research. To test this learning mechanism, we use a dataset covering outcomes of world-wide R&D projects in the pharmaceutical industry, and proxy knowledge flows with forward citations received by patents associated with each project. Empirical results confirm theoretical predictions that patents associated with successfully completed projects (i.e., leading to drug launch on the market) receive more citations than those associated to failed (terminated) projects, which in turn are cited more often than patents lacking clinical or preclinical information. We therefore offer evidence of the value of failures as research inputs in (pharmaceutical) innovation

Suggested Citation

  • Jing-Yuan Chio & Laura Magazzini & Fabio Pammolli & Massimo Riccaboni, 2012. "The Value of Failures in Pharmaceutical R&D," Working Papers 1/2012, IMT School for Advanced Studies Lucca, revised Jan 2012.
    • Handle: RePEc:ial:wpaper:1/2012
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    File URL: http://eprints.imtlucca.it/1202/1/EIC_WP_1_2012.pdf
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    References listed on IDEAS

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    Cited by:

    1. Branstetter, Lee & Chatterjee, Chirantan & Higgins, Matthew J., 2022. "Generic competition and the incentives for early-stage pharmaceutical innovation," Research Policy, Elsevier, vol. 51(10).
    2. Ruiz-Conde, Enar & Wieringa, Jaap E. & Leeflang, Peter S.H., 2014. "Competitive diffusion of new prescription drugs: The role of pharmaceutical marketing investment," Technological Forecasting and Social Change, Elsevier, vol. 88(C), pages 49-63.
    3. Gamba, Simona, 2017. "The Effect of Intellectual Property Rights on Domestic Innovation in the Pharmaceutical Sector," World Development, Elsevier, vol. 99(C), pages 15-27.
    4. BELDERBOS, René & GILSING, Victor & SUZUKI, Shinya, 2015. "Direct And Mediated Ties To Universities: ‘Scientific’ Absorptive Capacity And Innovation Performance Of Pharmaceutical Firms," Discussion paper series 2015-06, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.

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    More about this item

    Keywords

    R&D competition; patent policy; pharmaceutical industry;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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