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The Value of Failures in Pharmaceutical R&D

  • Jing-Yuan Chio

    (IMT Lucca Institute for Advanced Studies)

  • Laura Magazzini

    (Department of Economics, University of Verona)

  • Fabio Pammolli

    ()

    (IMT Lucca Institute for Advanced Studies and CERM Foundation)

  • Massimo Riccaboni

    ()

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

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

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File URL: http://eprints.imtlucca.it/1202/1/EIC_WP_1_2012.pdf
File Function: First version, 2012
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Paper provided by IMT Institute for Advanced Studies Lucca in its series Working Papers with number 1/2012.

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Length: 27 pages
Date of creation: Jan 2012
Date of revision: Jan 2012
Handle: RePEc:ial:wpaper:1/2012
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Web page: http://eprints.imtlucca.it/

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