Do Firms Underinvest in Long-Term Research? Evidence from Cancer Clinical Trials
Author(s)Budish, Eric; Roin, Ben; Williams, Heidi L.
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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.
DepartmentMassachusetts Institute of Technology. Department of Economics; Sloan School of Management
American Economic Review
American Economic Association
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
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