Corporate Philanthropy and Innovation: The Case of the Pharmaceutical Industry

Abstract

For decades now, pharmaceutical companies have engaged in corporate social responsibility (CSR) initiatives to strengthen their reputations, brand names, marketing, and public relations. But evidence from the authors’ recent study suggests that one particularly effective form of corporate philanthropy has been direct contributions to universities and other non‐profit research organizations, many of which have led to relationships that have developed into highly productive research partnerships. Such direct industry support for academic institutions and other research partners has ranged from unrestricted gifts to fee‐for‐service, and has taken the form of joint ventures and new research institutions as well as research contests and other types of collaborations.Moreover, such corporate giving should be viewed as an important, and highly productive, part of these companies’ innovation strategies. In support of this argument, the authors report that direct contributions by big pharma result in a greater quantity and quality of innovations—as measured by new patents—than the research that results from other forms of corporate philanthropy, notably grants made to and administered by the companies’ own foundations. Such direct contributions are also associated with patents that are more likely to broaden the corporate scope beyond the firms’ traditional areas of expertise, and that tend to have greater success in obtaining FDA drug approvals, than the patents resulting from R&D conducted by corporate‐sponsored foundations.