Is Europe a Laggard in Pharmaceuticals? R&D Joint Ventures, Patent Quality and R&D Productivity

This paper examines the idea that the USA has outshined Europe in the race for new medicines as a result of a flight of business R&D expenditure to the USA. It adopts a methodology that accounts for R&D price inflation, considers the role of both ‘performed' R&D and ‘extra-mural' R&D, and focuses on R&D productivity and patent quality as key indicators of innovation. The study provides three new insights: (a) R&D expenditure yields more patents in the USA but this is due to Europe's superior performance in patent quality and sales; (b) government expenditure on R&D and extra-mural R&D drive international patent collaboration, and (c) the latter is a crucial determinant of patent quality