Fabio Pammolli

The Nature and the Extent of the Market for Technology in Biopharmaceuticals

The biopharmaceutical industry is a typical example of the development of technological collaborations, as well as of technological competition, between larger established firms and smaller high-tech specialist firms (the so-called New Biotechnology Firms — NBFs). These two types of firms perform innovative activities at different stages, with different degree of risk, and with different probability of failure. By using a comprehensive database of 2078 drug R&D projects promoted all over the world during the 1990s, this study assesses the different performance of R&D processes conducted under different governance structures, most notably projects that are fully internalised by the companies vis-avis projects developed in collaboration with other firms. Moreover, this study compares the different specialisation and performance of large drug companies with respect to the NBFs. Results show that the established pharmaceutical companies have comparative advantages with respect to NBFs in drug development, while there is no advantage related to scale in drug discovery. Furthermore, NBFs undertake less risky project, which are more likely to fail at earlier clinical stages.

Quantifying the negative impact of brain drain on the integration of European science

Counterintuitively, by joining the European Union, scientific collaboration in entrant countries became less international. The 2004/2007 European Union (EU) enlargement by 12 member states offers a unique opportunity to quantify the impact of EU efforts to expand and integrate the scientific competitiveness of the European Research Area (ERA). We apply two causal estimation schemes to cross-border collaboration data extracted from millions of academic publications from 1996 to 2012, which are disaggregated across 14 subject areas and 32 European countries. Our results illustrate the unintended consequences following the 2004/2007 enlargement, namely, its negative impact on cross-border collaboration in science. First, we use the synthetic control method to show that levels of European cross-border collaboration would have been higher without EU enlargement, despite the 2004/2007 EU entrants gaining access to EU resources incentivizing cross-border integration. Second, we implement a difference-in-difference panel regression, incorporating official intra-European high-skilled mobility statistics, to identify migration imbalance—principally from entrant to incumbent EU member states—as a major factor underlying the divergence in cross-border integration between Western and Eastern Europe. These results challenge central tenets underlying ERA integration policies that unifying labor markets will increase the international competitiveness of the ERA, thereby calling attention to the need for effective home-return incentives and policies.

The memory of science: Inflation, myopia, and the knowledge network

Abstract Scientific production is steadily growing, exhibiting 4% annual growth in publications and 1.8% annual growth in the number of references per publication, together producing a 12-year doubling period in the total supply of references, i.e. links in the science citation network. This growth has far-reaching implications for how academic knowledge is connected, accessed and evaluated. Against this background, we analyzed a citation network comprised of 837 million references produced by 32.6 million publications over the period 1965–2012, allowing for a detailed analysis of the ‘attention economy’ in science. Our results show how growth relates to ‘citation inflation’, increased connectivity in the citation network resulting from decreased levels of uncitedness, and a narrowing range of attention – as both very classic and very recent literature are being cited increasingly less. The decreasing attention to recent literature published within the last 6 years suggests that science has become stifled by a publication deluge destabilizing the balance between production and consumption. To better understand these patterns together, we developed a generative model of the citation network, featuring exponential growth, the redirection of scientific attention via publications’ reference lists, and the crowding out of old literature by the new. We validate our model against several empirical benchmarks, and then use perturbation analysis to measure the impact of shifts in citing behavior on the synthetic systems properties, thereby providing insights into the functionality of the science citation network as an infrastructure supporting the memory of science.

On Economic Complexity and the Fitness of Nations

Complex economic systems can often be described by a network, with nodes representing economic entities and edges their interdependencies, while network centrality is often a good indicator of importance. Recent publications have implemented a nonlinear iterative Fitness-Complexity (FC) algorithm to measure centrality in a bipartite trade network, which aims to represent the ‘Fitness’ of national economies as well as the ‘Complexity’ of the products being traded. In this paper, we discuss this methodological approach and conclude that further work is needed to identify stable and reliable measures of fitness and complexity. We provide theoretical and numerical evidence for the intrinsic instability in the nonlinear definition of the FC algorithm. We perform an in-depth evaluation of the algorithm’s rankings in two real world networks at the country level: the global trade network, and the patent network in different technological domains. In both networks, we find evidence of the instabilities predicted theoretically, and show that ‘complex’ products or patents tend often to be those that countries rarely produce, rather than those that are intrinsically more difficult to produce.

Intragenerational redistribution in a funded pension system

In a general equilibrium framework, this paper studies the properties, in terms of labour market distortions and capital accumulation, of three social security systems: a pay-as-you-go notional defined contribution (PAYG NDC), a fully funded (FF), and a novel modified FF (MFF) system, which includes an intragenerational redistributive component to guarantee minimum living standards to future low-income retirees. We show that while PAYG NDC depresses labour supply and physical capital accumulation, FF is neutral on both dimensions. Conversely, MFF slightly increases physical capital accumulation, without significantly reducing labour supply incentives. Moreover, it reduces the burden of future intergenerational redistribution, and increases social welfare.

A Comparison of Game-Theoretic Models for Parallel Trade

Within the EU Single Market for medicines, differences in drug prices, regulations, and transaction costs may create, under suitable conditions, arbitrage opportunities well before patent expiration, giving an incentive to the occurrence of parallel trade. When this is permitted, parallel traders may obtain a profit from buying drugs in a country where prices are lower, then re-selling them in a country where prices are higher. This phenomenon may cause inefficiencies from a global welfare perspective, and reduce the manufacturers’ incentive to invest in Research and Development (R & D). Given this framework, in this paper, we investigate the efficiency (expressed in terms of the price of anarchy) of the subgame-perfect Nash equilibria associated with five dynamic noncooperative game-theoretic models for the parallel trade of pharmaceuticals. We also compare such models with regard to the manufacturer’s incentive to invest in R & D. More specifically, first we find in closed form the optimal value of the global welfare of two countries, which is obtained by solving a suitable quadratic optimization problem modeling the decision-making process of a global planner. Then, we use such a result to evaluate and compare the prices of anarchy of five games modeling the interaction between a manufacturer in the first country and a potential parallel trader in the second country. The first three games refer, respectively, to the cases of no parallel trade threat, parallel trade threat, and parallel trade occurrence at equilibrium. Then, we investigate two modifications of the third game, in which its transfer payment from the potential parallel trader to the manufacturer is, respectively, removed/determined by Nash bargaining. For completeness, we also consider a decision-theoretic model of no parallel trade threat. For what concerns the incentive for the manufacturer to invest in R & D, the results of our numerical comparison show that the decision-theoretic model of no parallel trade threat is always the one with the highest incentive, whereas the two game-theoretic models of parallel trade threat/occurrence that do not include the transfer payment provide typically the lowest incentives. Moreover, the latter two models have the highest prices of anarchy (i.e., their equilibria have the lowest efficiencies). From a policy-making perspective, improvements are obtained if suitable countermeasures are taken to help the manufacturer recover from the costs of R & D, such as the inclusion of a transfer payment in the model.