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

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

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.

Eric Budish, Benjamin N. Roin, and Heidi Williams

American Economic Review

July 2015

I didn't find this helpful.This was helpful. Please let us know if you found this article helpful.
Loading...
By |2018-01-01T00:00:00-07:00January 1st, 2018|Efficiency/Growth, Intellectual Property, Patents, Reference, Reforms|