The Contribution of Public Science to Industrial Innovation: An Application to the Pharmaceutical Industry

This paper uses an empirical model specified across technology classes within a single industry to test the importance of public science as a source of industrial innovation and to measure its contribution. Two new data sets are combined to evaluate the contribution of public science to product innovation into the pharmaceutical industry. Comprehensive data covering public biomedical research funding since 1955 are combined with detailed information on approved new chemical entities (NCEs) introduced by the industry. Approved NECs are the industry's most sophisticated new products that pass the standards for safety and efficacy set by the U.S. Food and Drug Administration. This approach allows one to look at variation in NECs by class and over time in response to variations in R&D inputs.