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Missing Markets for Innovation: Evidence from New Uses for Existing Drugs

Author

Listed:
  • Eric Budish
  • Maya M. Durvasula
  • Benjamin N. Roin
  • Heidi L. Williams

Abstract

We investigate missing markets for innovation: contexts where intellectual property rights necessary to incentivize research investment are either unavailable or unenforceable. A simple theoretical model formalizes the conditions that yield missing investment. We identify an empirical setting—research into new uses for existing drugs— with sharp variation in the enforceability of intellectual property rights on comparable inventions. We show that when intellectual property rights become unenforceable, research investment and commercialization nearly cease. Estimates of the value of this missing investment are in the trillions of dollars. We discuss the implications of these findings for the design of innovation policy.

Suggested Citation

  • Eric Budish & Maya M. Durvasula & Benjamin N. Roin & Heidi L. Williams, 2025. "Missing Markets for Innovation: Evidence from New Uses for Existing Drugs," NBER Working Papers 34222, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:34222
    Note: EH IO LE PR
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    Cited by:

    1. Pierre Dubois, 2025. "Pharmaceutical Regulation and Incentives for Innovation in an International Perspective," Working Papers hal-05310888, HAL.

    More about this item

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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