Prof. Matthew Higgins, Ph.D.

Affiliated Research Fellow

Innovation and Entrepreneurship Research
Professor of Entrepreneurship & Strategy, University of Utah Director, Sorenson Center for Discovery & Innovation

matt.higgins(at)eccles.utah.edu

Areas of Interest:

Corporate Strategy, Pharmaceutical Economics, Economics of Innovation, Applied Industrial Organization

Academic Résumé

Since 2019
Professor of Entrepreneurship & Strategy, David Eccles School of Business, University of Utah

Since 2019
Director, Sorenson Center for Discovery & Innovation, David Eccles School of Business, University of Utah

Since 04/2019
Affiliated Research Fellow at the Max Planck Institute for Innovation and Competition (Innovation and Entrepreneurship Research)

Since 2015
Research Associate, National Bureau of Economic Research

2013 - 2019
Associate Professor of Strategy & Innovation, Scheller College of Business, Georgia Institute of Technology

2012 - 2015
Faculty Research Fellow, National Bureau of Economic Research

2007 - 2013
The Imlay Assistant Professor of Strategic Management, Scheller College of Business, Georgia Institute of Technology

2005 - 2007
Assistant Professor of Strategic Management, College of Management, Georgia Institute of Technology

2004 - 2005
Visiting Assistant Professor Finance, J. Mack Robinson College of Business, Georgia State University

Selected Publications

Articles in Refereed Journals

Higgins, Matthew John; Yan, Xin; Chatterjee, Chirantan (2021). Unpacking the Effects of Adverse Regulatory Events: Evidence from Pharmaceutical Relabeling, Research Policy, 50 (1). DOI

  • We provide causal evidence that regulation induced product shocks significantly impact aggregate demand and firm performance in pharmaceutical markets. Event study results suggest an average loss between $569 million and $882 million. Affected products lose, on average, $186 million over their remaining effective patent life. This leaves a loss of between $383 million and $696 million attributable to declines in future innovation. Our findings complement research that shows drugs receiving expedited review are more likely to suffer from regulation induced product shocks. Thus, it appears we may be trading off quicker access to drugs today for less innovation tomorrow. Results remain robust to variation across types of relabeling, market sizes, and levels of competition.
  • Also published as: NBER Working Paper 24957

Higgins, Matthew John; Lacombe, Donald; Sell, Briana; Young, Andrew (2020). Evaluating the Effects of Small Business Administration Lending on Growth, Small Business Economics 2020. DOI

  • Conventional wisdom suggests that small businesses are innovative engines of Schumpetarian growth. However, as small businesses, they are likely to face credit rationing in financial markets. If true, then policies that promote lending to small businesses may yield substantial economy-wide returns. We examine the relationship between Small Business Administration (SBA) lending and local economic growth using a spatial econometric framework and a sample of U.S. counties. We find evidence that a county’s SBA lending per capita is associated with direct negative effects on its income growth. We also find evidence of indirect negative effects on the growth rates of neighboring counties. Overall, a 10% increase in SBA loans per capita is associated with a cumulative decrease in income growth rates of about 0.02 to 0.03 percentage points.
  • Also published in 2014 as NBER Working Paper No. 20543

Palermo, Vincenzo; Higgins, Matthew John; Ceccagnoli, Marco (2019). How Reliable Is the Market for Technology?, Review of Economics and Statistics, 101 (1), 107-120. DOI

  • Research has focused on why and when firms access external technology markets. Less is known about the reliability of patents attached to licensed technologies during litigation. Unreliable patents expose a firm to loss of downstream revenues. We address this by constructing a data set of patent litigation in the pharmaceutical industry and exploit a change in patent law that exogenously increased the probability of litigation. We find that licensed patents are more likely to fall during litigation. This effect is isolated to firms with fewer intellectual property capabilities and less patenting experience, suggesting that benefits from external technology are not shared equally.
  • Also published as: NBER Working Paper No. 21103

Ceccagnoli, Marco; Higgins, Matthew John; Kang, Hyunsung D. (2018). Corporate Venture Capital as a Real Option in the Market for Technology, Strategic Management Journal, 39, 1138-1146. DOI

  • We apply real options (RO) theory to understand the role of corporate venture capital (CVC) investments and its relationship with internal R&D capabilities in supporting the acquisition of external technologies. We formulate hypotheses about key drivers of the option value of CVC and the decision to exercise the RO using a dyadic dataset of global pharmac eutical firms and their biotech partners. Our findings suggest that the option value of CVC is higher for investors with weaker scientific capabilities; engaging the markets for technology in distant technological fields; and, when their innovation pipeline is tilted toward the late-stage development process. Finally , the licensing of high-value technologies is the most likely form of option exercise when technological uncertainty is reduced post-CVC. Managerial Summary: Despite the fact that one of the main goals of corporate venture capital (CVC) investments in high-tech industries is to gain a window on fut ure tech- nologies, the relationship between CVC and other strategies used to acquire external technologies, such as licensing, has not been adequately explored. To address this gap, we formulat e hypotheses about key drivers of the decision to make CVC investments as a wait-and-see strat- egy in the markets for technology (MFT) using a longitudinal dataset of global pharmaceutical firms and their biotech partners. We find that investors' scientific capabilities, technological domains, and research pipelines impact investors' decisions to make CVC investments prior to other MFT transactions. In our research setting, investors typically acquire high-value technologies via licensing when technological uncertainty is reduced post-CVC.
  • Also published as: NBER Working Paper 21424

Lurkin, Virginie; Garrow, Laurie A.; Higgins, Matthew John; Newman, Jeffrey P. (2017). Accounting for Price Endogeneity in Airline Itinerary Choice Models: An Application to Continental U.S. Markets, Transportation Research Part A: Policy and Practice, 100, 228-246. DOI

  • Network planning models, which forecast the profitability of airline schedules, support many critical decisions, including equipment purchase decisions. Network planning models include an itinerary choice model that is used to allocate air total demand in a city pair to different itineraries. Multinomial logit (MNL) models are commonly used in practice and capture how individuals make trade-offs among different itinerary attributes; however, none that we are aware of account for price endogeneity. This study formulates an itinerary choice model that is consistent with those used by industry and corrects for price endogeneity using a control function that uses several types of instrumental variables. We estimate our model using a database of more than 10 million passenger trips provided by the Airlines Reporting Corporation. Results based on Continental U.S. markets for May 2013 departures show that models that fail to account for price endogeneity overestimate customers’ value of time and result in biased price estimates and incorrect pricing recommendations. The size and comprehensiveness of our database allows us to estimate highly refined departure time of day preference curves that account for distance, direction of travel, number of time zones traversed, departure day of week and itinerary type (outbound, inbound or one-way). These time of day preference curves can be used by airlines, researchers, and government organizations in the evaluation of different policies such as congestion pricing.

Further Publications, Press Articles, Interviews

Higgins, Matthew John (2020). Predictions on the Medical Device Economic Comeback. Podcast Interview with Rick Barnett (CEO, Rep-Lite).

Discussion Papers

Byrski, Dennis; Gaessler, Fabian; Higgins, Matthew John (2021). Market Size and Research: Evidence from the Pharmaceutical Industry, Max Planck Institute for Innovation & Competition Research Paper, No. 21-16.

  • Prior literature has established a link between changes in market size and pharmaceutical innovation; whether a link exists with scientific research remains an open question. If upstream research is not responsive to these changes, the kinds of scientific discoveries that flow into future drug development could be disconnected from downstream demand. We explore this question by exploiting the effects of quasi-experimental variation in market size introduced by Medicare Part D. We find no causal relationship between market size and biomedical research in the decade following the implementation of Medicare Part D. While many factors have been shown to motivate scientists to conduct research, this result suggests that changes in market size provide no such incentive. We do find, however, limited support for a response by corporate scientists conducting applied research. Implications for pharmaceutical innovation policy are discussed.
  • Also published as NBER Working Paper No. 28858

Higgins, Matthew John; Yan, Xin; Chatterjee, Chirantan (2020). Unpacking the Effects of Adverse Regulatory Events: Evidence from Pharmaceutical Relabeling, NBER Working Paper, 24957. DOI

  • We provide causal evidence that regulation induced product shocks significantly impact aggregate demand and firm performance in pharmaceutical markets. Event study results suggest an average loss between $569 million and $882 million. Affected products lose, on average, $186 million over their remaining effective patent life. This leaves a loss of between $383 million and $696 million attributable to declines in future innovation. Our findings complement research that shows drugs receiving expedited review are more likely to suffer from regulation induced product shocks. Thus, it appears we may be trading off quicker access to drugs today for less innovation tomorrow. Results remain robust to variation across types of relabeling, market sizes, and levels of competition.
  • Also published in Research Policy, 50,1 (2021), 104126

Higgins, Matthew John; Kronlund, Mathias J.; Park, Ji Min; Pollet, Joshua (2020). The Role of Assets In Place: Loss of Market Exclusivity and Investment (NBER Working Paper, 27588 ). DOI

  • We utilize a novel identification strategy to analyze the impact of assets in place on firms' decisions for future projects. We exploit the context in the pharmaceutical industry, where the loss of market exclusivity for a branded drug can be used to separate the impact of cash flows generated by a firm's current assets in place from the characteristics of its future investment opportunities. We first show that around the exclusivity losses in our sample of large drugs, the affected firms' profitability drop significantly. The timing of this profitability decrease was predetermined many years ago, and therefore, arguably independent of current investment opportunities. Nevertheless, we find that R&D spending drops by approximately 25% over two years following the loss of exclusivity. We also find that stock repurchases and cash balances decline significantly. Our findings do not support the predictions of traditional capital budgeting, but are more consistent with the pecking order theory. These results further point to a lack of long-term lifecycle management that could mitigate the effect of predictable negative shocks to cash flows.

Higgins, Matthew John; Yan, Xin; Chatterjee, Chirantan (2019). Market Effects of Adverse Regulatory Events: Evidence from Drug Relabeling, NBER Working Paper, No. 24957. DOI

    Kim, Yujin; Chatterjee, Chirantan; Higgins, Matthew John (2019). Moving Beyond the Valley of Death: Regulation and Venture Capital Investments in Early-Stage Biopharmaceutical Firms, NBER Working Paper, No. 25202. DOI

    • Can regulation reduce risks associated with investing in early-stage firms? Using the passage of the European Orphan Drug Act (EU-ODA), we examine this question in the biopharmaceutical industry. We provide causal evidence that venture capitalists (VCs) are more likely to invest in early-stage firms operating in sub-fields disproportionately affected by EU-ODA. The switch to early-stage investments appears strongest among VCs that previously faced greater levels of information asymmetry. We also find that the level of syndication declined for early-stage investments and exit performance improved. We conclude discussing the implications of our findings for public policy, entrepreneurship and innovation.

    Palermo, Vincenzo; Higgins, Matthew John; Ceccagnoli, Marco (2019). Assets with "Warts": How Reliable is the Market for Technology?, NBER Working Paper, No. 21103. DOI

    • Existing research has focused on why and when firms may choose to access the external technology market. Surprisingly, however, less is known about the reliability of the patents attached to these external technologies in the face of litigation. “Weak” external patents expose a firm to the potential loss of downstream revenues. To address this question we construct a novel dataset of patent litigation in the pharmaceutical industry. We exploit a change in U.S. patent law as a natural experiment to test whether external patents are more reliable than those developed internally. We find that acquired patents are more likely to fall during litigation; they are less reliable then internal technologies. Losses lead to an average reduction in market capitalization of $450 million. Overall, our results demonstrate the critical importance of the underlying reliability of external patents and provides a cautionary note to the potential benefits of accessing external technology markets.
    • Also published in: Review of Economics and Statistics, 101 (1), 2019, 107-120

    Young, Andrew T.; Higgins, Matthew John; Lacombe, Donald J.; Sell, Briana (2014). The Direct and Indirect Effects of Small Business Administration Lending on Growth: Evidence from U.S. County-Level Data, NBER Working Paper, No. 20543. DOI

    • Conventional wisdom suggests that small businesses are innovative engines of Schumpetarian growth. However, as small businesses, they are likely to face credit rationing in financial markets. If true then policies that promote lending to small businesses may yield substantial economy-wide returns. We examine the relationship between Small Business Administration (SBA) lending and local economic growth using a spatial econometric framework across a sample of 3,035 U.S. counties for the years 1980 to 2009. We find evidence that a county's SBA lending per capita is associated with direct negative effects on its income growth. We also find evidence of indirect negative effects on the growth rates of neighboring counties. Overall, a 10% increase in SBA loans per capita is associated with a cumulative decrease in income growth rates of about 2%.
    • Also online published in: Small Business Economics 2020

    Publications

    Presentations and Lectures

    03.2020
    Moving Beyond the Valley of Death: Regulation and Venture Capital Investments
    SMS Special Conference, Berkeley, USA
    Location: online


    01.2020
    The Role of Assets in Place: Loss of Market Exclusivity and Investment
    American Finance Association
    Location: San Diego, US


    01.11.2019
    Estimating Effects of Adverse Regulatory Events: Evidence from Drug Relabeling
    Joint Research Conference, Brigham Young University
    Location: Boston, Massachusetts, US


    01.07.2019
    Estimating Effects of Adverse Regulatory Events: Evidence from Drug Relabeling
    Western Economic Association
    Ort: San Francisco, California, US


    20.05.2019
    Moving Beyond the Valley of Death: Regulation and Venture Capital Investments in Early-Stage Biopharmaceutical Firms
    Bates & White
    Ort: Washington DC, US


    13.03.2019
    Moving Beyond the Valley of Death: Regulation and Venture Capital Investments in Early-Stage Biopharmaceutical Firms
    Max Planck Institute for Innovation and Competition
    Location: Munich