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

Eric Budish, Benjamin N. Roin and Heidi Williams ()

No 19430, NBER Working Papers from National Bureau of Economic Research, Inc

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) clinicaltrial endpoints, targeted R&D subsidies, and patent design.

JEL-codes: I10 O30 O34 (search for similar items in EconPapers)
Date: 2013-09
New Economics Papers: this item is included in nep-ino, nep-ipr, nep-pr~ and nep-law
Note: AG EH IO LE PE PR
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Published as “Do Firms Underinvest in Long-Term Research? Evidence from Cancer Clinical Trials” (with Benjamin Roin and Heidi Williams) American Economic Review, Vol 105(7), 2044-2085.

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Journal Article: Do Firms Underinvest in Long-Term Research? Evidence from Cancer Clinical Trials (2015)
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