Do Firms Underinvest in Long-Term Research? Evidence from Cancer Clinical Trials
Name
Williams_Do firms underinvest.pdf
Size
832.52 KB
Format
Adobe PDF
Checksum (MD5)
859b401497932886125266bb7d6cf35f
Author(s)
Budish, Eric
Roin, Ben
Williams, Heidi L.
Date Issued
July 2015
Journal
American Economic Review
Publisher
American Economic Association
Citation
Budish, Eric, Benjamin N. Roin, and Heidi Williams. “ Do Firms Underinvest in Long-Term Research? Evidence from Cancer Clinical Trials.” American Economic Review 105, no. 7 (July 2015): 2044–2085. © American Economic Association
Version
Final published version
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) clinical-trial endpoints, targeted R&D subsidies, and patent design.
MIT Department
Massachusetts Institute of Technology. Department of Economics
Sloan School of Management
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1257/aer.20131176
