Differential effects of public and private funding in the medical device industry

ABSTRACT

Introduction: Funding for scientific advancement comes from two dominant sources: public funds used to generate knowledge, and private sector funds in the pursuit of commercial products. It is unclear how to compare the outputs of these two financial mechanisms because both sectors are motivated by common goods but are also governed by divergent forces. Employment within a geographic region may be a metric of mutual value that can be applied equally to assess the societal impacts of two financing sources.

Areas covered: The authors focused on the medical device industry, which is a robust sector of growth for the U.S. economy. The U.S. NIH and venture capital community are representatives of public and private capital, respectively. Using a longitudinal employment dataset of 247 distinct locations, the authors found that NIH funding tends to create more jobs directly compared to venture capital funding. Moreover, the indirect effect of governmental funding is initially smaller than that of venture capital funding for the first two years, but eventually surpasses that of venture capital funding.

Expert commentary: These findings imply that policy decisions regarding financial allocations in the medical device industry should consider the appropriate typology of financial capital and its consequences.

KEYWORDS:

• Medical device
• NIH
• venture capital
• employment
• mediation effect

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Corrigendum

Acknowledgments

We thank Institute for Strategy and Competitiveness at Harvard University for their assistance and generous access to data. We also thank Matthew Higgins, Henry Sauermann, Joshua C. Kang, Diana Hicks, John Walsh, Jerry Thursby, Frank Rothaermel, seminar participants at Georgia Institute of Technology, and conference participants at Atlanta Conference on Science and Innovation Policy at Atlanta, GA, and Atlanta Competitive Advantage Conference at Atlanta, GA for helpful comments and suggestions.

Declaration of interest

The authors have no relevant affiliations or financial involvement with any organization or entity with a financial interest in or financial conflict with the subject matter or materials discussed in the manuscript. This includes employment, consultancies, honoraria, stock ownership or options, expert testimony, grants or patents received or pending, or royalties. Peer reviewers on this manuscript have no relevant financial or other relationships to disclose.

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Funding

This paper is not funded.