We investigate the rise of industrial research laboratories in the U.S. pharmaceutical industry from 1927 to 1946. Our analysis demonstrates that the growth of industrial pharmaceutical laboratories is positively and significantly correlated with the extent of local university research, after controlling for other observables and correcting for simultaneity bias using instrumental variables. Overall, our analyses suggest that while the presence of industrial facilities helped shape the direction of university research programs in some cases, there was a significant, positive, and causal effect running from university research to the growth of pharmaceutical research laboratories in the first half of the twentieth century in the United States. © 2007.
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