Incentives and disincentives to invest in research and development Essay

Incentives and disincentives to invest in research and development - Essay Example A critical input for a firm’s success might be a derivative of its investments in R&D projects. For this reason, competition is one of the primary incentives that would influence a business to invest in R&D, which is also an essential element that can lead to the growth and profitability of a business (Atkinson & Ezell, 2014, p. 27). In this case, intellectual property rights accorded to innovative entrepreneurship provide an incentive to for the investment in innovative developments. These rights contribute to the protection of a firm’s intellectual assets, which enhances profitability and heightens the entity’s competitiveness. For instance, Gilead Sciences Inc., a pharmaceutical organisation in the United States, invested in an R&D project to develop Sovaldi (Sofosbuvir), a drug used in the treatment of Hepatitis C. This drug was introduced in the market in December 2013 (Palmer, 2015, np). The invention not only improved the profitability of the firm, but it also led to the sustainability of the firm’s competitiveness in the industry. There is a possibility of addressing market failures for R&D by influencing the incentives for a private firm. In this case, addressing issues of the appropriateness of an invention’s research results is possible by granting the inventor the monopoly over the intellectual property (Curci, 2010, p. 45). However, the disincentive of the appropriation relates to the risks and ambiguity of R&D investments. In this case, a firm can invest in an R&D project.