Market failure in the diffusion of clinician-developed innovations: The case of off-label drug discoveries
Author(s)von Hippel, Eric A.; DeMonaco, Harold; de Jong, Jeroen P. J.
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Medical doctors occasionally discover potentially valuable new off-label uses for drugs during their clinical practice. They apply these to help their own patients, but often have minimal incentives to invest in diffusing them further. Thus, the benefits that other clinicians might obtain are to some extent an externality from the perspective of the discoverer. This represents a form of market failure: effort invested in diffusion could lower adoption costs for many, but few innovators will invest that effort and social welfare will be accordingly reduced. In this study we explore for empirical evidence for the market failure just described, and do find evidence for it. In a sample of US clinicians, diffusion efforts increase the diffusion of generally valuable discoveries, but innovating clinicians typically invest little to support diffusion. We conclude with a discussion of how such a market failure could be addressed.
DepartmentSloan School of Management
Science and Public Policy
Oxford University Press
von Hippel, Eric A., Harold DeMonaco, and Jeroen P. J. de Jong. "Market failure in the diffusion of clinician-developed innovations: The case of off-label drug discoveries." Science and Public Policy, 44(1), (February 2017), 121-131.
Final published version