IP on basic research reduces subsequent scientific research and product development

Summary:

Using newly-collected data on the sequencing of the human genome by the public Human Genome Project and the private firm Celera, this paper estimates the impact of Celera’s gene-level IP on subsequent scientific research and product development.

Across a range of empirical specifications, I find evidence that Celera’s IP led to reductions in subsequent scientific research and product development on the order of 20 to 30 percent.

A caveat to this interpretation of these results is that if innovation inputs are scarce, my estimates could reflect the substitution of innovative effort away from Celera genes towards non-Celera genes (as opposed to a net decrease in total innovation over the set of all genes). If substitution is relevant and researchers optimally choose their line of research in the absence of IP, quantifying the welfare costs of IP on cumulative innovation requires estimating the cost of distorting research towards sub-optimal projects.

Source:¬†Heidi L. Williams, 2013. “Intellectual Property Rights and Innovation: Evidence from the Human Genome,” Journal of Political Economy, University of Chicago Press, vol. 121(1), pages 1 – 27.

Link: http://www.nber.org/papers/w16213

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