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New insights from Harvard Business School faculty on research and development in a variety of industries on topics including managing R&D, government regulation, and commercialization.
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Creating the Experimentation Organization

by Michael Blanding

New tools allow companies to innovate on an unprecedented scale, in every aspect of business. But the organization must also change. Stefan Thomke previews his forthcoming book, Experimentation Works. Open for comment; Comment(s) posted.

Corporate Innovation Increasingly Benefits from Government Research

by Michael Blanding

Nearly a third of US patents rely directly on government-funded research, says Dennis Yao. Is government too involved in supporting private sector innovation—or not enough? Open for comment; Comment(s) posted.

Pursuing Precision Medicine at Intermountain Healthcare

Re: Richard G. Hamermesh, Kathy E. Giusti

What happens when Intermountain Healthcare invests resources in an innovative precision medicine unit to provide life-extending, genetically targeted therapies to late-stage cancer patients? Professors Richard Hamermesh and Kathy Giusti discuss the case and its connections to their work with the Kraft Precision Medicine Accelerator. Open for comment; Comment(s) posted.

Find and Replace: R&D Investment Following the Erosion of Existing Products

by Joshua Krieger, Xuelin Li, and Richard T. Thakor

This study sheds light on how product outcomes shape the direction of innovation and markets for technology. In the drug development industry in particular, negative product shocks appear to spur investment changes both within the directly affected firm and in competing firms in the same R&D markets.

Corruption, Government Subsidies, and Innovation: Evidence from China

by Lily Fang, Josh Lerner, Chaopeng Wu, and Qi Zhang

Governments subsidize a growing number of innovation efforts, many of which may face the challenge of corruption. Using Chinese data, this study finds corruption-related distortions in government R&D subsidies, which diminished after the 2012 anti-corruption campaign and rotation of provincial officials. It provide insights for designing effective R&D subsidy programs.

Developing Novel Drugs

by Joshua Krieger, Danielle Li, and Dimitris Papanikolaou

This paper contributes to our understanding of how financing constraints affect the direction of innovation in drug development. The authors develop a new measure of drug novelty based on molecular characteristics, and explore the tradeoffs involved in decisions to develop more novel therapies. Open for comment; Comment(s) posted.

A Better Business Model for Fighting Cancer

by Julia Hanna

The Kraft Precision Medicine Accelerator aims to speed up the development and delivery of cancer therapies by improving the business processes that surround them. Open for comment; Comment(s) posted.

The Impact of the Entry of Biosimilars: Evidence from Europe

by Fiona Scott Morton, Ariel Dora Stern, and Scott Stern

Biosimilars are large-molecule drugs that, while not an exact copy of already-approved large-molecule drugs, have been shown to be therapeutically equivalent. Much like generic drugs, which become available when a small-molecule drug goes off patent, biosimilars are lower in cost than their reference products and present an opportunity for savings when large-molecule drugs’ patents expire. Biosimilars have been available in the United States only since 2015 but have been regulated, approved, and sold in Europe for over a decade. This paper examines the European experience to help inform policy design and institutional choices for the United States. Topics covered include the entry of distributors and unique products; predictors of average product prices following biosimilar competition; and penetration of biosimilars as a share of total sales.

New Medical Devices Get To Patients Too Slowly

by Michael Blanding

The FDA has streamlined drug testing to ensure new therapies come to market quickly. But when it comes to life-giving medical devices, approvals seem unnecessarily slow, according to research by Ariel Dora Stern. Open for comment; 6 Comment(s) posted.

Financing Innovation

by William R. Kerr & Ramana Nanda

There is growing consensus that well-functioning financial markets play a central role in driving economic growth through their ability to spur technological innovation. In this paper for the Annual Review of Financial Economics, the authors ask how financial markets might actively shape the nature of R&D that is undertaken. They also examine how this may impact technological innovation and growth through the shaping of the ideas that are developed across firms. Drawing on a new but growing literature on the role that capital markets and financial intermediaries play in impacting firm-level innovation, the authors first elaborate on theoretical contributions regarding why financing R&D projects might be distinct from financing other types of projects and the channels through which financial intermediaries and capital markets can impact innovation. They then discuss empirical studies on financing innovation in mature firms, in particular the literature on how ownership and capital structure impact the amount and nature of innovation undertaken by firms. The paper also looks at innovation in startups and the growing literature on the effect that multi-stage financing has on innovation in young firms. Three main themes emerge: 1) A growing body of work documents a role for debt financing related to innovation. 2) A very active area of research has looked at "learning" across multi-stage financing. 3) There is strong interaction between financing choices for innovation and changing external conditions. Key concepts include: Financing constraints can be extensive in the context of firms engaged in R&D and innovation-with the ability to shape both the rate and the trajectory of innovation. Capital structure plays a central role in the outcome of innovations. Bank finance is an important source of finance, particularly for larger firms with tangible and intangible assets to pledge as collateral. Public markets may provide deep pockets but pose a set of agency costs that might be particularly harmful for firms engaged in exploration and novel innovations. There is a growing interest among academics and practitioners in the multi-stage financing of innovation, both in established firms and startups, and understanding the optimal contracts and policies that might stimulate innovation. Closed for comment; 0 Comment(s) posted.

A Scholarly Crowd Explores Crowdsourcing

by Sean Silverthorne

At the Open and User Innovation Workshop, several hundred researchers discussed their work on innovation contests, user-led product improvements, and the biases of crowds. Closed for comment; 1 Comment(s) posted.

Innovation Is Magic. Really

by Dina Gerdeman

When Stefan Thomke teaches students how to manage innovation and creativity, he turns to an unexpected source: Magician Jason Randal. Open for comment; 12 Comment(s) posted.

Pay Attention To Your ‘Extreme Consumers’

by Michael Blanding

Jill Avery and Michael Norton explain what marketers can learn from consumers whose preferences lie outside of the mainstream. Open for comment; 5 Comment(s) posted.

U.S. High-Skilled Immigration, Innovation, and Entrepreneurship: Empirical Approaches and Evidence

by William R. Kerr

In the 2008 Current Population Survey, immigrants represented 16 percent of the United States workforce with a bachelor's education. Moreover, immigrants accounted for 29 percent of the growth in this workforce during the 1995-2008 period. Exceeding these strong overall contributions, the role of immigrants within science, technology, engineering, and mathematics (STEM) fields is even more pronounced. Even so, the importance of the global migration of STEM talent has been under-studied. In this paper, which focuses exclusively on the United States' experience, the author reviews academic work regarding the effects of global migration on innovation and entrepreneurship. Findings show that while some aspects of the phenomenon are well understood, such as the quantity and quality of immigrants, scholars still have very little insight on others, such as return migration. Overall, immigration has clearly been essential for the United States' leadership in innovation and entrepreneurship. There is also evidence of positive impacts of high-skilled diasporas for home countries, although the ledger that can be measured in the United States remains incomplete. Key concepts include: Scholars are just beginning to trace out and quantify how the economy reacts to immigration. Academic research on low-skilled immigration has a longer history, and efforts to evaluate high-skilled immigration are just starting to define its unique attributes from general immigration (e.g., the impact of firm sponsorship of H-1B visas). In terms of quantity, immigrants generally account for about a quarter of the US workforce engaged in science, technology, engineering, and mathematics (STEM) fields. This share is growing rapidly. In terms of quality, most immigrants engaged in STEM work in the United States are better trained for this work than natives (e.g., chosen academic fields of study, levels of education obtained). Conditional on these education choices, immigrants and natives appear quite comparable in quality, with some greater potential for the "long tail" of superstars. Immigration is associated with higher levels of innovation for the United States. The short-run consequences for natives are minimal. However, this aggregate achievement involves some displacement of U.S. workers, and the long-run impact is less understood. Long-run estimates range from very positive to substantial crowding-out depending upon the study and technique. High-skilled immigrants promote knowledge flows and foreign direct investments to their home countries. It is still unclear whether this benefit fully compensates the country for the potential negative consequences from the talent migration. Closed for comment; 0 Comment(s) posted.

Clusters of Entrepreneurship and Innovation

by Aaron Chatterji, Edward Glaeser & William Kerr

For many decades, the common wisdom among local officials pursuing employment growth for their areas was to attract a large firm to relocate. This "smokestack chasing" led to many regional governments bidding against each other and providing substantial incentives to large plants making their location choice decisions. The success of entrepreneurial clusters in recent decades, however, has challenged this wisdom, and now many policy makers state that they want their regions "to be the next Silicon Valley." This has led to extensive efforts to seed local entrepreneurship, with today's politicians routinely announcing the launch of an entrepreneurial cluster in a hot industry, such as biotechnology, nanotechnology, or advanced manufacturing. In this paper, the authors explore the rationale for and efficacy of policies to promote local entrepreneurship and innovation and reflect on recent initiatives in this domain. Key concepts include: Entrepreneurship is often linked to local economic growth, and economic theory provides rationales for why governments may want to support entrepreneurship and innovative activities in their local areas (e.g., spillover benefits to neighboring firms). Economic theory and practice also identifies potential pitfalls in these efforts. Policies supporting the emergence of clusters of small-scale entrepreneurs allow policy interventions to touch many entrepreneurship simultaneously, providing important scale to interventions, and appear to respect the empirical tendency of economic activity to cluster. Such approaches can also avoid the dangers of targeting specific firms for support. Despite this foundation and the tremendous current policy interest for entrepreneurship, the optimal formulation of entrepreneurship policy is not yet known. Indeed, relative to our understanding of how to craft policies for mature fields like international trade and monopoly, we have very little experience evaluating policies towards start-up clusters. The best path forward involves extensive experimentation and evaluation. Without advances in these dimensions, we cannot be confident that policies to promote entrepreneurship will have their intended impact. Closed for comment; 0 Comment(s) posted.

Fostering Translational Research: Using Public-Private Partnerships to Improve Firm Survival, Employment Growth, and Innovative Performance

by Sen Chai & Willy C. Shih

The authors demonstrate that a unique Danish mediated public-private partnership model for fostering the translation of basic science into commercial applications help firms significantly decrease the likelihood of bankruptcy while substantially increasing the average level of employment. Funded firms in the study were granted significantly more patents and published more peer-reviewed papers, and the impact of these publications was significantly higher. In addition, the mediated partnership model improved the knowledge produced as well as the collaborative behavior of scientists with a significantly higher level of citations and more cross-institutional coauthored publications. Key concepts include: Mediated public-private partnership funding affects firm performance especially in the mid-term, three to four years after funding. From a policy standpoint, by providing a public-private partnership funding scheme coupled with strong mediation, governments are able to incentivize firms to take on more basic science research and development and make the results more successful. Closed for comment; 0 Comment(s) posted.

LEED-ing by Example

by Carmen Nobel

When a local government decides to pursue environmentally aware construction policies for its own buildings, the private sector follows suit, according to new research by Timothy Simcoe and Michael W. Toffel. Closed for comment; 7 Comment(s) posted.

Colocation and Scientific Collaboration: Evidence from a Field Experiment

by Kevin Boudreau, Ina Ganguli, Patrick Gaule, Eva Guinan & Karim Lakhani

In recent years there has been considerable interest in the policy arena on fostering collaborative and especially interdisciplinary collaborations. Yet there is scant evidence on how to do this in practice. To learn how team members find each other in the scientific community and decide to collaborate, the authors designed and carried out an experiment involving Harvard University and its affiliated hospitals. Results suggest that matching between scientists may be subject to considerable frictions, even among scientists in relatively close geographic proximity and in the same organizational system. However, even a brief and focused event facilitating face-to-face interactions can be useful for the formation of new scientific collaborations. Key concepts include: Face-to-face interactions play a central role in the initiation of new collaborations. Creating settings where scientists meet face to face and discuss early-stage research ideas can be useful for fostering collaboration. Matching between scientists is not easy. For example, many factors that affect successful collaboration are not easily observed to both parties until collaboration is well underway, such as personal chemistry and scheduling constraints. Time spent in events that facilitate face-to-face interactions also has opportunity costs. The effect of such activities on scientific productivity and welfare more generally is still unclear. This is the first study to bring field experimental methods to a workplace setting in the scientific community. Closed for comment; 0 Comment(s) posted.

Funding Innovation: Is Your Firm Doing it Wrong?

by Carmen Nobel

Many companies are at a loss about how to fund innovation successfully. In his new book, The Architecture of Innovation, Professor Josh Lerner starts with this advice: get the incentives right. Open for comment; 4 Comment(s) posted.

Creating an R&D Strategy

by Gary P. Pisano

This note by Gary P. Pisano provides a framework for designing an R&D strategy. It starts with the simple notion that a strategy is a system approach to solving a problem. An R&D strategy is defined a coherent set of interrelated choices across decision concerning: organizational architecture, processes, people, and project portfolios. To illustrate the framework, we use examples of three pharmaceutical companies and examine how their different R&D strategies were rooted in different assumptions about the core driver of R&D performance. This suggests that the very first question to be answered in strategy development is: What's our shared understanding of the root cause of the problem we are trying to solve? Key concepts include: A good strategy provides consistency, coherence, and alignment. The "game plan" for an R&D organization can be broken down into 4 strategic levers: architecture, processes, people, and portfolio. Together, decisions made in each of these categories constitute the R&D strategy. R&D performance results from the interaction of many different decisions and choices, including the size and location of R&D facilities, the division of labor between various groups, the choice of technologies used inside the R&D organization, the selection of personnel, the allocation of resources, the design of processes for managing projects, and other factors. Closed for comment; 0 Comment(s) posted.