We theoretically and empirically study the effect of variation in regulatory review time on firms’ choices between radical and incremental innovations. We differentiate between entry into new segments (the extensive margin) and increasing the number of innovations in a given sector (the intensive margin). Our theoretical investigation indicates additional entry into medical device segments as a result of shorter application review times. It also predicts firm-level substitution effect, suggesting firms shift their R&D to innovation applications with relatively shorter review times. To test the theoretical predictions, we utilize a unique data set from the U.S. Food and Drug Administration that contains all product market approvals in the high-risk medical device market for the 1978–2007 period. The empirical results generally support our theoretical predictions. However, the results also show that firms are more responsive to changes in the review time for incremental applications compared to radical ones.

中文翻译：

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监管审查时间对渐进式和根本性创新的影响：高风险医疗设备市场的证据

我们从理论和经验上研究了监管审查时间的变化对企业在激进和渐进式创新之间进行选择的影响。我们区分进入新领域（广泛的利润）和增加特定领域的创新数量（集中的利润）。我们的理论研究表明，由于缩短了应用程序审查时间，因此进入了医疗设备细分市场。它还预测了企业层面的替代效应，这表明企业将其研发转移到具有相对较短审查时间的创新应用上。为了检验理论预测，我们利用了美国食品药品监督管理局的独特数据集，其中包含1978-2007年期间高风险医疗器械市场上的所有产品市场许可。实证结果通常支持我们的理论预测。但是，结果还显示，与激进申请相比，企业对增量申请的审查时间变化更敏感。