"Spillovers from Publicly Funded Biomedical Research onto Industry"

We measure the extent to which NIH investments in basic science affect the research choices of private sector firms. Using newly available data on patentpublication links and exploiting the structure of NIH grant review, we address two key econometric challenges to identifying spillovers. First, we measure the pool of knowledge relevant for a firm by directly linking a firm's patent output to the publications those patents cite, to the grants that fund those publications, and ultimately to a pool of related research supported by the same grant funding committee. Second, we address concerns about the endogeneity of federal funding for disease areas by instrumenting investments in particular disease area with changes in funding arising from other disease areas that use similar methods. This is possible because the review committee an application is evaluated in tells us about the methods the application uses, while the patenting firm and funding institute tell us about the disease area of application. This analysis allows us to examine what kinds of firms are most likely to take advantage of publicly funded research and to quantify the impact of these spillover projects on innovation.