The Determinants of Development Costs

  • Edwin Mansfield
  • John Rapoport
  • Jerome Schnee
  • Samuel Wagner
  • Michael Hamburger


Although a great many studies have been made of the costs of production in various firms and industries, there is surprisingly little information concerning the costs of development. Even the most basic sorts of data are generally unavailable. For example, we do not have even crude estimates of how much it cost to develop the individual new products that have arisen in recent years in various sectors of the economy. Beyond this, little attempt has been made to test various hypotheses concerning the determinants of development costs. Economists have hypothesized that the cost of developing a new product depends on the size and complexity of the product being developed, the extent of the advance in performance that is sought, the development time, the available stock of knowledge, components, and materials, and the development strategy that is pursued. But there has been little or no attempt to test these hypotheses or provide quantitative estimates of the effects of these or other factors.


Dosage Form Development Project Product Category Chemical Entity Development Cost 
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  1. 1.
    For some previous discussions of the determinants of development costs, see Edwin Mansfield, The Economics of Technological Change (New York: W. W. Norton, 1968);Google Scholar
  2. Richard Nelson, Merton Peck and Edward Kalachek, Technology, Economic Growth, and Public Policy (Washington, D.C.: The Brookings Institution, 1967);Google Scholar
  3. J. Jewkes, D. Sawers, and R. Stillerman, The Sources of Invention, revised edition (New York: W. W. Norton, 1970).Google Scholar
  4. For a study of military aircraft, see Thomas Glennan, “Methodological Problems in Evaluating the Effectiveness of Military Aircraft Development,” RAND Corporation, P-3357 (May 1966).Google Scholar
  5. 12.
    See R. Nelson, “Uncertainty, Learning, and the Economics of Parallel Research and Development Efforts,” Review of Economics and Statistics (1961)Google Scholar
  6. B. Klein, “The Decision Making Problem in Development,” in The Rate and Direction of Inventive Activity (National Bureau of Economic Research, 1962).Google Scholar
  7. 15.
    Max Tischler and R. G. Denkewalter, “Drug Research-Whence and Whither,” in Progress in Drug Research, ed. by Ernest Jucker (Basel, Switzerland, 1966), p. 12.Google Scholar

Copyright information

© W. W. Norton & Company, Inc. 1971

Authors and Affiliations

  • Edwin Mansfield
    • 1
  • John Rapoport
    • 2
  • Jerome Schnee
    • 3
  • Samuel Wagner
    • 4
  • Michael Hamburger
    • 5
  1. 1.Wharton SchoolUniversity of PennsylvaniaUSA
  2. 2.Mount Holyoke CollegeUSA
  3. 3.Columbia UniversityUSA
  4. 4.Temple UniversityUSA
  5. 5.Federal Reserve Bank of New YorkUSA

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