Local Innovation Spillovers of NIH Funding

• In Event: Innovation in the Public, Private, and Nonprofit Sectors

Abstract

The origins of medical and technological innovations often trace back to academic research, yet the channels through which university discoveries reach the corporate sector remain poorly understood. This paper examines how university research affects local corporate innovation by exploiting the dramatic expansion of National Institutes of Health (NIH) funding from the mid-1990s to 2003—which rose from \$24.1 billion to \$44.96 billion in constant 2021 dollars—as an exogenous shock that differentially affected research activity across commuting zones. Using difference-in-difference event study models that compare innovation across 65 commuting zones containing R1 universities based on their historical NIH funding exposure (1985–1990), we find that a 1 percent increase in pre-period funding generated \$1 to \$1.5 million in additional yearly funding from 2002 onward, 2 to 3 additional research projects, and 8 to 15 additional NIH-supported publications. This research expansion spurred local innovation concentrated in corporate rather than university patent filing, with particularly strong effects in biomedical and physics fields.  By 2002, corporate biomedical yearly patent filings increased by approximately 0.2 percent for each 1 percent increase in exposure to pre-doubling NIH funding. Former NIH principal investigators contribute 0.15 new biomedical patent filings per 1 percent increase in pre-doubling funding, while their non-PI research collaborators contribute an additional 0.04 filings by 2012.  These direct and indirect PI contributions, while statistically significant, account for only a modest share of the overall rise in local corporate innovation, suggesting that knowledge spillovers mostly operate through channels beyond the funded researchers themselves.

Authors

• Emiliano Harris, Cornell University
  Presenting Author

• Gautier Guillaume Lenfant, Cornell University
  Non-Presenting Co-Author