Public R&D Investments and Private Sector Patenting: Evidence from NIH Funding Rules

From Pierre Azoulay, Joshua Graff-Zivin, Danielle Li, and Bhaven Sampat:

This paper measures the impact of public R&D investments on innovation by private sector firms. We quantify the returns to grant spending at the National Institutes of Health (NIH) in terms of the biomedical patents it generates. Our paper makes two contributions. First, we use newly constructed bibliometric data to develop a method for flexibly measuring the outcomes of basic science investments. Second, we take advantage of the institutional features of NIH peer review to address concerns about the endogeneity of grant funding. Our results show that NIH funding generates more private patents than it crowds out. A $10 million increase in NIH support generates 2.8 additional patents; given an average grant award of $1.34 million, this means that we expect one additional patent private sector patent to be produced for every three additional NIH grants. We document, moreover, substantial cross-disease spillovers in funding for biomedical research; approximately half of all patents generated by NIH funding for one disease area are primarily relevant for a different disease.

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About ozidar

I'm an Assistant Professor of Economics at the University of Chicago Booth School of Business and a Faculty Research Fellow at National Bureau of Economic Research. You can follow me on twitter @omzidar. http://faculty.chicagobooth.edu/owen.zidar/index.html
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