Public Investment and Industry Incentives in Life‐Science Research

Abstract

Life-science research has shifted rapidly from the public to the private sector, raising questions about government's remaining role. We shed light on the issue by employing a dynamic investment-response model to examine the public's impact on industry life-science research effort and success. We find that government expenditures in both basic biological research and agricultural and medical science create substantial spillovers for private firms. The spillovers are, unfortunately, partly nullified by government competition for scarce research inputs. Yet even after accounting for such competition, public investment has been strongly complementary to private investment. Indeed, opportunities created through public research are the principal source of growth in industry life sciences.

The Roots of Agricultural Innovation: Patent Evidence of Knowledge Spillovers

“…Consistent with our results,Wang, Xia, and Buccola (2009) find evidence of substantial spillovers from upstream biological to downstream agricultural and medical science, and from the public to the private sector in both downstream agriculture and downstream medicine.…”

“…Consideration of vertical spillover effects in agriculture is rare. One exception is Wang, Xia, and Buccola (2009), who relate public research in three life-science fields (biology, agriculture, and medicine), and private research in two of these fields (agriculture and medicine), to research output (measured by patents) of private firms in agriculture and medicine. 2 This paper's contribution is to provide new methods and data on the scope of knowledge spillovers in agriculture.…”

Agricultural Research by the Private Sector

“…However, in a rapidly changing environment, competition between public and private agricultural R&D can emerge, at least in the short run. On the basis of a national survey of US academic bioscience researchers in 2003-2004, Buccola et al (2009 found that individual scientists tended to specialize in their sources of research funding and that an increase in private funding led to a decrease in public funding (and vice versa) for that scientist. Such developments could cause crowding out in funding sources in the short run but would likely not affect the system level over the long term, given entry and exit possibilities of new scientists.…”

Public-Private Partnerships: Goods and the Structure of Contracts

“…PPPs that conduct research related to natural resources can be structured so that private firms sponsor research that benefits public goods research (Spielman et al 2007, Rausser et al 2008. Public investment in research can stimulate private investment by creating new technologies that can be profitably exploited by the private sector (Wang 2007). In forming these relationships, PPPs cannot be justified solely as a fundraising device where public funds are replaced with private funds, because the payout to the private firm can cause greater distortions than a tax levied by the public sector (Sadka 2006, Engel et al 2007.…”