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

Pierre Azoulay, Joshua S. Graff Zivin, Danielle Li, Bhaven N. Sampat

NBER Working Paper No. 20889
Issued in January 2015, Revised in January 2017
NBER Program(s):Health Care, Public Economics, Productivity, Innovation, and Entrepreneurship

We quantify the impact of scientific grant funding at the National Institutes of Health (NIH) on patenting by pharmaceutical and biotechnology firms. Our paper makes two contributions. First, we use newly constructed bibliometric data to develop a method for flexibly linking specific grant expenditures to private-sector innovations. Second, we take advantage of idiosyncratic rigidities in the rules governing NIH peer review to generate exogenous variation in funding across research areas. Our results show that NIH funding spurs the development of private-sector patents: a $10 million boost in NIH funding leads to a net increase of 2.3 patents. Though valuing patents is difficult, we report a range of estimates for the private value of these patents using different approaches.

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Document Object Identifier (DOI): 10.3386/w20889

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