Abstract We investigate whether private research investments are distorted away from long-term projects. Our theoretical model highlights two potential sources of this distortion: short-termism and the fixed patent term. Our empirical context is cancer research, where clinical trials -- and hence, project durations -- are shorter for late-stage cancer treatments relative to early-stage treatments or cancer prevention. Using newly constructed data, we document several sources of evidence that together show private research investments are distorted away from long-term projects. The value of life-years at stake appears large. We analyze three potential policy responses: surrogate (non-mortality) clinical-trial endpoints, targeted R&D subsidies, and patent design. (JEL D92, G31, I11, L65, O31, O34)

Citation Budish, Eric, Benjamin N. Roin, and Heidi Williams. 2015. "Do Firms Underinvest in Long-Term Research? Evidence from Cancer Clinical Trials." American Economic Review , 105 (7): 2044-85 . DOI: 10.1257/aer.20131176 Choose Format: BibTeX EndNote Refer/BibIX RIS Tab-Delimited