Innovation Policy and the Economy, Volume 1

Innovation and Economic Growth, Intellectual Property and Patents

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Adam B. Jaffe, Josh Lerner and Scott Stern


Volume 1 in NBER Book Series: Innovation Policy and the Economy, eds. Adam B. Jaffe, Josh Lerner, and Scott Stern, MIT Press, Cambridge MA, 2001


Volume 1 is the first in a series of 11 books discussing policies related to technology and innovation.

Policy Relevance

Governments can use efficient policies to encourage the development of vaccines and drugs, and to foster basic science.

Main Points

  • Government support of life science research probably has a very large and positive effect on applied pharmaceutical research. Each dollar of investment in basic life science research, like the Human Genome Project, may yield more than $1.30 in future benefits for the public.
  • Pharmaceutical companies may not develop vaccines for tropical diseases because they fear that, after development, governments will not compensate them enough to justify the cost of development. Government commitments to buy vaccines at a price set in advance might solve this problem.
  • In many high technology industries, innovation at one firm often requires the use of technologies patented by other firms. Antitrust authorities can use several principles to distinguish between patent licensing meant to inhibit competition and patent licensing necessary for innovation.
  • The transfer of Internet technology from the public sector to the private sector was a success for several reasons, including the absence of major technical and commercial hurdles and the ease with which the Internet can be adapted for different commercial purposes.
  • The Bayh-Dole Act of 1980 made it easier for researchers and institutions that develop patentable technology using federal funds to keep the resulting patents. This seems to have aided in the diffusion of patentable technology to the private sector.
  • The training of scientists and engineers at universities is arguably more important to commercial innovation than academic science. Government policies to produce more and better scientists and engineers may be more effective in promoting innovation than subsidizing innovation directly.


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