The Global Location of Biopharmaceutical Knowledge Activity: New Findings, New Questions

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Location possibilities for biopharmaceutical firms are expanding, driven by factors such as falling natural and political barriers to trade and communication, extension and strengthening of patent protection through institutions including the World Trade Organization, and growing supplies of skilled labor and related infrastructure in large, relatively low‐cost countries. This paper examines the causes and consequences of this global expansion of knowledge discovery by biopharmaceutical firms. We first discuss the empirical evidence on the extent and nature of this process. We then examine whether this global spread of biopharmaceutical R&D supports or hurts host country knowledge activity. We conclude that foreign knowledge discovery by biopharmaceutical companies tends to complement, not substitute for, home country activities, and we therefore anticipate no significant reduction in US R&D employment or expenditure in this sector due to “globalization” per se. The same cannot be said for policy choices in areas such as tax and immigration, which may have a substantial impact on location of R&D activity.