Early Academis Science and the Birth of Industrial Research Laboratories in the U.S. Pharmaceutical Industry

The establishment and growth of industrial research laboratories is one of the key organizational innovations affecting technological progress in the United States in the 20th century. In this paper, we investigate the rise of industrial research laboratories in the U.S. pharmaceutical industry between 1927 and 1946. Our evidence suggests that institutional factors, namely the presence of universities dedicated to research, played a significant role in the establishment and diffusion of private pharmaceutical research laboratories. Specifically, we document that the growth of industrial pharmaceutical laboratories between 1927 and 1946 is positively and significantly correlated with the extent of local university research, after controlling for other observable factors likely to influence the geographic distribution of industrial research. We supplement our core results with case histories illustrative of early university-industry interaction and an examination of the determinants of university-industry research cooperation. Our qualitative historical evidence and analyses of the birth of chemical engineering programs suggest that industry also played a role in influencing university research agendas. We correct for feedback effects from industry to universities using instrumental variables. Overall, our analyses suggest that while the presence of industrial facilities helped shape the direction of university research programs, there was a significant, positive, and causal effect running from university research to the growth of pharmaceutical research laboratories in the first half of the twentieth century in the United States.

Climbing Atop the Shoulders of Giants: The Impact of Institutions on Cumulative Research

While the cumulative nature of knowledge is recognized as central to economic growth, the microeconomic foundations of cumulativeness are less understood. This paper investigates the impact of a research-enhancing institution on cumulativeness, highlighting two effects. First, a selection effect may result in a high correlation between "high-quality" institutions and knowledge of high intrinsic quality. Second, an institution may have a marginal impact -- an incremental influence on cumulativeness, conditional on the type and quality of knowledge considered. This paper distinguishes these effects in the context of a specific institution, biological resource centers (BRCs). BRCs are "living libraries" that authenticate, preserve, and offer independent access to biological materials, such as cells, cultures, and specimens. BRCs may enhance the cumulativeness of knowledge by reducing the marginal cost to researchers of drawing on prior research efforts. We exploit three key aspects of the environment in which BRCs operate to evaluate how they affect the cumulativeness of knowledge: (a) the impact of scientific knowledge is reflected in future scientific citations, (b) deposit into BRCs often occurs with a substantial lag after initial research is completed and published, and (c) "lagged" deposits often result from shocks unrelated to the characteristics of the materials themselves. Employing a difference-in-differences estimator linking specific materials deposits to journal articles, we find evidence for both selection effects and the marginal impact of BRCs on the cumulativeness of knowledge associated with deposited materials. Moreover, the marginal impact increases with time and varies with the economic and institutional conditions in which deposit occurs.

The Determinants of National Innovative Capacity

Motivated by differences in R&D productivity across advanced economies, this paper presents an empirical examination of the determinants of country-level production of international patents. We introduce a novel framework based on the concept of national innovative capacity. National innovative capacity is the ability of a country to produce and commercialize a flow of innovative technology over the long term. National innovative capacity depends on the strength of a nation's common innovation infrastructure (cross-cutting factors which contribute broadly to innovativeness throughout the economy), the environment for innovation in its leading industrial clusters, and the strength of linkages between these two areas. We use this framework to guide our empirical exploration into the determinants of country-level R&D productivity, specifically examining the relationship between international patenting (patenting by foreign countries in the United States) and variables associated with the national innovative capacity framework. While acknowledging important measurement issues arising from the use of patent data, we provide evidence for several findings. First, the production function for international patents is surprisingly well-characterized by a small but relatively nuanced set of observable factors, including R&D manpower and spending, aggregate policy choices such as the extent of IP protection and openness to international trade, and the share of research performed by the academic sector and funded by the private sector. As well, international patenting productivity depends on each individual country's knowledge stock.' Further, the predicted level of national innovative capacity has an important impact on more downstream commercialization and diffusion activities (such as achieving a high market share of high-technology export markets). Finally, there has been convergence among OECD countries in terms of the estimated level of innovative capacity over the past quarter century.