IDEAS home Printed from https://ideas.repec.org/p/zbw/zewdip/4558.html
   My bibliography  Save this paper

Does Public Scientific Research Complement Industry R&D Investment? The Case of NIH Supported Basic and Clinical Research and Pharmaceutical Industry R&D

Author

Listed:
  • Toole, Andrew A.

Abstract

This research investigates the hypothesis that publicly funded scientific research complements private R&D investment in the pharmaceutical industry. New microlevel data on public research investment by the U.S. National Institutes of Health allow measures of basic and clinical research in seven medical areas to be included in a distributed lag model explaining pharmaceutical R&D investment. Using a panel of therapeutic classes observed over eighteen years, the analysis finds strong evidence that public basic and clinical research are complementary to pharmaceutical R&D and, thereby, stimulate private industry investment. However, differences in the relevance and degree of scientific and market uncertainty between basic and clinical public research lead to differences in the magnitude and timing of the pharmaceutical investment response. The results indicate that a dollar increase in public basic research stimulates an additional $8.38 in pharmaceutical investment after eight years. The industry R&D response to public clinical research is smaller in magnitude and shorter in duration with a dollar increase in public clinical research stimulating an additional $2.35 in pharmaceutical investment over a three year period.

Suggested Citation

  • Toole, Andrew A., 2005. "Does Public Scientific Research Complement Industry R&D Investment? The Case of NIH Supported Basic and Clinical Research and Pharmaceutical Industry R&D," ZEW Discussion Papers 05-75, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:4558
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/24171/1/dp0575.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Wiggins, Steven N, 1983. "The Impact of Regulation on Pharmaceutical Research Expenditures: A Dynamic Approach," Economic Inquiry, Western Economic Association International, vol. 21(1), pages 115-128, January.
    2. David, Paul A. & Hall, Bronwyn H., 2000. "Heart of darkness: modeling public-private funding interactions inside the R&D black box," Research Policy, Elsevier, vol. 29(9), pages 1165-1183, December.
    3. Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-1148, September.
    4. Jaffe, Adam B, 1989. "Real Effects of Academic Research," American Economic Review, American Economic Association, vol. 79(5), pages 957-970, December.
    5. Iain Cockburn & Rebecca Henderson, 1997. "Public-Private Interaction and the Productivity of Pharmaceutical Research," NBER Working Papers 6018, National Bureau of Economic Research, Inc.
    6. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2003. "Links and Impacts: The Influence of Public Research on Industrial R&D," Chapters, in: Aldo Geuna & Ammon J. Salter & W. Edward Steinmueller (ed.), Science and Innovation, chapter 4, Edward Elgar Publishing.
    7. David, Paul A. & Hall, Bronwyn H. & Toole, Andrew A., 2000. "Is public R&D a complement or substitute for private R&D? A review of the econometric evidence," Research Policy, Elsevier, vol. 29(4-5), pages 497-529, April.
    8. Bronwyn H. Hall & Zvi Griliches & Jerry A. Hausman, 1984. "Patents and R&D: Is There A Lag?," NBER Working Papers 1454, National Bureau of Economic Research, Inc.
    9. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
    10. Dominique Guellec & Bruno Van Pottelsberghe De La Potterie, 2003. "The impact of public R&D expenditure on business R&D," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 12(3), pages 225-243.
    11. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
    12. Arora, Ashish & Gambardella, Alfonso, 1994. "Evaluating technological information and utilizing it : Scientific knowledge, technological capability, and external linkages in biotechnology," Journal of Economic Behavior & Organization, Elsevier, vol. 24(1), pages 91-114, June.
    13. Henry Grabowski & John Vernon, 2000. "The determinants of pharmaceutical research and development expenditures," Journal of Evolutionary Economics, Springer, vol. 10(1), pages 201-215.
    14. Narin, Francis & Hamilton, Kimberly S. & Olivastro, Dominic, 1997. "The increasing linkage between U.S. technology and public science," Research Policy, Elsevier, vol. 26(3), pages 317-330, October.
    15. Hall, Bronwyn H & Griliches, Zvi & Hausman, Jerry A, 1986. "Patents and R and D: Is There a Lag?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(2), pages 265-283, June.
    16. Jeannette Colyvas & Michael Crow & Annetine Gelijns & Roberto Mazzoleni & Richard R. Nelson & Nathan Rosenberg & Bhaven N. Sampat, 2002. "How Do University Inventions Get Into Practice?," Management Science, INFORMS, vol. 48(1), pages 61-72, January.
    17. Ward, Michael R & Dranove, David, 1995. "The Vertical Chain of Research and Development in the Pharmaceutical Industry," Economic Inquiry, Western Economic Association International, vol. 33(1), pages 70-87, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Toole, Andrew A, 2007. "Does Public Scientific Research Complement Private Investment in Research and Development in the Pharmaceutical Industry?," Journal of Law and Economics, University of Chicago Press, vol. 50(1), pages 81-104, February.
    2. Bettina Becker, 2013. "The Determinants of R&D Investment: A Survey of the Empirical Research," Discussion Paper Series 2013_09, Department of Economics, Loughborough University, revised Sep 2013.
    3. Becker Wolfgang & Peters Jürgen, 2005. "Innovation Effects of Science-Related Technological Opportunities / Innovationseffekte von technologischen Möglichkeiten aus dem Wissenschaftsbereich: Theoretical Considerations and Empirical Findings," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 225(2), pages 130-150, April.
    4. Jürgen Janger, 2015. "Business Science Links For a New Growth Path. WWWforEurope Working Paper No. 107," WIFO Studies, WIFO, number 58413.
    5. Nasirov, Shukhrat & Joshi, Amol M., 2023. "Minding the communications gap: How can universities signal the availability and value of their scientific knowledge to commercial organizations?," Research Policy, Elsevier, vol. 52(9).
    6. Rong, Zhao & Wu, Binzhen, 2020. "Scientific personnel reallocation and firm innovation: Evidence from China’s college expansion," Journal of Comparative Economics, Elsevier, vol. 48(3), pages 709-728.
    7. Beck, Mathias & Junge, Martin & Kaiser, Ulrich, 2017. "Public Funding and Corporate Innovation," IZA Discussion Papers 11196, Institute of Labor Economics (IZA).
    8. GROSSE Olivier & SEVI Benoît, 2005. "Dérégulation et R&D dans le secteur énergétique européen," Cahiers du CREDEN (CREDEN Working Papers) 05.07.59, CREDEN (Centre de Recherche en Economie et Droit de l'Energie), Faculty of Economics, University of Montpellier 1.
    9. Wolfgang Becker, 2003. "Evaluation of the Role of Universities in the Innovation Process," Discussion Paper Series 241, Universitaet Augsburg, Institute for Economics.
    10. Agrawal, Ajay & Cockburn, Iain, 2003. "The anchor tenant hypothesis: exploring the role of large, local, R&D-intensive firms in regional innovation systems," International Journal of Industrial Organization, Elsevier, vol. 21(9), pages 1227-1253, November.
    11. Kokko, Ari & Tingvall, Patrik Gustavsson & Videnord, Josefin, 2015. "The growth effects of R&D spending in the EU: A meta-analysis," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 9, pages 1-26.
    12. Basse Mama, Houdou, 2018. "Nonlinear capital market payoffs to science-led innovation," Research Policy, Elsevier, vol. 47(6), pages 1084-1095.
    13. Keld Laursen & Ammon Salter, 2003. "Searching Low and High What Types of Firms use Universities as a Source of Innovation?," DRUID Working Papers 03-16, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    14. Hall, Bronwyn H. & Mairesse, Jacques & Mohnen, Pierre, 2010. "Measuring the Returns to R&D," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 1033-1082, Elsevier.
    15. Filippopoulos, Nikolaos & Fotopoulos, Georgios, 2022. "Innovation in economically developed and lagging European regions: A configurational analysis," Research Policy, Elsevier, vol. 51(2).
    16. David B. Audretsch & Dennis P. Leyden & Albert N. Link, 2013. "Universities as research partners in publicly supported entrepreneurial firms," Chapters, in: Public Support of Innovation in Entrepreneurial Firms, chapter 12, pages 175-192, Edward Elgar Publishing.
    17. van Beers, Cees & Berghäll, Elina & Poot, Tom, 2008. "R&D internationalization, R&D collaboration and public knowledge institutions in small economies: Evidence from Finland and the Netherlands," Research Policy, Elsevier, vol. 37(2), pages 294-308, March.
    18. Jinyoung Kim & Sangjoon John Lee & Gerald Marschke, 2009. "International Knowledge Flows: Evidence from an Inventor-Firm Matched Data Set," NBER Chapters, in: Science and Engineering Careers in the United States: An Analysis of Markets and Employment, pages 321-348, National Bureau of Economic Research, Inc.
    19. José Ángel Zúñiga-Vicente & César Alonso-Borrego & Francisco J. Forcadell & José I. Galán, 2014. "Assessing The Effect Of Public Subsidies On Firm R&D Investment: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 28(1), pages 36-67, February.
    20. Nicola Lacetera, 2003. "Incentives and spillovers in R&D activities: an agency-theoretic analysis of industry-university relations," Microeconomics 0312004, University Library of Munich, Germany.

    More about this item

    Keywords

    R&D; pharmaceuticals; NIH; distributed lag models;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:4558. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zemande.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.