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Do firms underinvest in long-term research? Evidence from cancer clinical trials

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  • Eric Budish
  • Benjamin N. Roin
  • Heidi Williams

Abstract

We investigate whether private research investments are distorted away from long-term projects. Our theoretical model highlights two potential sources of this distortion: short-termism and the fixed patent term. Our empirical context is cancer research, where clinical trials – and hence, project durations – are shorter for late-stage cancer treatments relative to early-stage treatments or cancer prevention. Using newly constructed data, we document several sources of evidence that together show private research investments are distorted away from long-term projects. The value of life-years at stake appears large. We analyze three potential policy responses: surrogate (non-mortality) clinicaltrial endpoints, targeted R&D subsidies, and patent design.

Suggested Citation

  • Eric Budish & Benjamin N. Roin & Heidi Williams, 2013. "Do firms underinvest in long-term research? Evidence from cancer clinical trials," NBER Working Papers 19430, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:19430
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    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • 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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