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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., 2011. "The impact of public basic research on industrial innovation: Evidence from the pharmaceutical industry," ZEW Discussion Papers 11-063, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:11063
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    Cited by:

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    2. Jimmy Le, 2014. "Financing Sustainable Drug Development for Neglected Diseases: A Case of Push-Pull Mechanisms and Global Public Goods," The Economic and Social Review, Economic and Social Studies, vol. 45(2), pages 245-259.
    3. Mathies, Charles & Slaughter, Sheila, 2013. "University trustees as channels between academe and industry: Toward an understanding of the executive science network," Research Policy, Elsevier, vol. 42(6), pages 1286-1300.

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    More about this item

    Keywords

    R&D; NIH; social return; biomedical; research lags; public science; new molecular entities;
    All these keywords.

    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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