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

@article{Budish2015DoFU,
  title={Do firms underinvest in long-term research? Evidence from cancer clinical trials.},
  author={Eric Budish and Benjamin N Roin and Heidi L. Williams},
  journal={The American economic review},
  year={2015},
  volume={105 7},
  pages={2044-2085}
}
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… CONTINUE READING

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