Fuqua professor Aaron Chatterji and colleague Kira Fabrizio studied the effect of the market for ideas, or collaborations between inventors and health care companies to develop new products, on the speed and direction of new innovation. Innovation typically does not take place in a single organization, but is often the product of multiple upstream and downstream players. How well the market of ideas functions has an impact on what products get made and how quickly they get to market.
The authors focus on the U.S. medical device industry where practicing physicians work closely with companies, providing ideas and insights for product development. These ties between physicians and companies have been scrutinized as of late, potentially introducing barriers in this market for ideas. Chatterji and Fabrizio are the first to document the impact of these frictions on innovation. They find that during a U.S. Department of Justice investigation of the top five orthopedic device makers over their relationships with physicians, the market for ideas was inhibited and collaboration diminished, thus reducing the quality and number of products made. A deeper understanding of the relationship between market ideas and rate and direction of innovation can have further implications for social welfare and economic growth. For example, a dysfunctional market for ideas can lead to less innovation, reducing competition, increasing prices, and subsequently reducing product quality.