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American Economic Review Vol. 100 No. 2 2010

Network Effects in Biology R&D

Joachim Henkel1; Stephen M. Maurer2

1 Technische Universität München and CEPR, London. Schöller Chair in Technology and Innovation Management, Technische Universität München, Arcisstr. 21, 80333 Munich, Germany. · 2 University of California at Berkeley. Goldman School of Public Policy and Berkeley Law School, 2607 Hearst Ave., Berkeley CA 94720.

Abstract

Network effects play a central role in industries such as software and electronics. So far, however, their role in shaping biotechnology innovation has largely been overlooked. Since network effects can make markets vulnerable to monopoly, it is important to know whether and to what extent they operate in biology. We address this issue by a multimethod study of academic and commercial stem cell research. We present statistics showing that researchers focus on a tiny fraction of available lines; that network effects provide the best explanation of this phenomenon; and that these effects are primarily driven by reduced user costs due to learning spillovers. We conclude with a model of network effects in biology research and development. Surprisingly, some winner-take-all outcomes are transient, so that antitrust intervention may not be necessary.

DOI
10.1257/aer.100.2.159
Volume
100
Issue
2
Pages
159-164
Language
en
Sources
openalex crossref bibtex:phds-export.bib

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