Pharmaceutical innovation collaboration, evaluation, and matching

Qianshuo Liu

Journal of Health Economics, 2024, vol. 98, issue C

Abstract: This paper theoretically studies pharmaceutical innovation collaborations, where heterogeneous firms compete for heterogeneous academics. At an interim stage, the firm evaluates the project, which allows it to monitor academics and decide whether to terminate the project to avoid the loss from a future failure. This paper explores the contract, project termination strategy, and collaboration matching. The firm’s innovation strategy (exploitations or explorations) determines the evaluation structure, which may affect the market equilibrium. By considering different innovation strategies, this paper shows that in each case, the equilibrium matching is unique (either positive or negative assortative). Consequently, the chosen innovation strategy plays a pivotal role in shaping equilibrium matching outcomes. These findings provide theoretical insights into pharma-academic alliances, shed light on the observed positive or negative assortative properties in the market, and advocate for the consideration of innovation strategies and evaluation structures in future research endeavors. Moreover, this paper also provides several empirical and policy implications.

Keywords: Pharmaceutical innovation; Collaboration; Performance evaluation; Contracts; Moral hazard; Matching (search for similar items in EconPapers)
JEL-codes: C78 D81 D82 D86 O31 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:98:y:2024:i:c:s0167629624000675

DOI: 10.1016/j.jhealeco.2024.102922

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