The International Consortium on Agricultural Biotechnology Research (ICABR)

 

 

Searching for Genes: Biotechnology, IPR and Spillovers in Crop Research

 

Richard Gray, Stavroula Malla, University of Saskatchewan, Canada,

 

 

Abstract

 

The introduction of biotechnologies associated with crop research has resulted in a change in the enforceability of intellectual property rights (IPR). The right to use many of the biotechnology processes involved in genetic research and the products of these biotechnologies are now effectively protected by IPR. Agricultural producers are required to sign agreements to use particular technologies and cannot retain seed for subsequent crop production. Furthermore, many of these genetic products are tied to the use of specific inputs, (eg. herbicides) or into particular processing markets. Overall, the products of biotech have become excludable private goods.

Property rights have affected the rules for the use of new technologies, the pricing of genetics, the distribution of the gains from research and the incentives for private research (Ulrich et al., 1987; Fulton and Keyowski, 1999). For instance, the introduction of property rights allows the owner of the technology to charge a greater amount for the annual use of the technology. While these higher charges increase the private return from creating new technology, they may increase the cost of farmers who use the technology and can't reproduce their own seed.

The goal of this study is to explore, how biotechnology and the changes to IPR have affected the structure, incentives and incidence of private and public agricultural research. The activities to be carried out include: (1) modeling and estimating the distributional impact of changing intellectual property rights; (2) modeling and estimating the spillovers between private and public research activities; and, (3) modeling and estimating the spillovers between basic and applied research.

This study models agricultural research in the context of search process and using a framework of imperfect competition within vertically related markets. The optimal search behavior is estimated as the difference between expected gain from the search and the cost of the search (e.g., Stigler 1961, Nelson 1970). Using this framework, crop variety research is modeled as sequence of experiments each composed of a number of trials searching for a desirable set of traits, such as the highest yield (Evenson and Kislev 1975, Evenson and Kislev 1976). The interaction between firms depends on the sets of rules and institutions -e.g. intellectual property rights- that are present. In the first stage, the imperfectly competitive research firms decide on the optimal amount of research trials. In the second stage, they choose the price they will charge for the variety to heterogeneous farmers.

The model will be empirically estimated using panel data from an extensive set of public and private data on investments in Canola research in Canada. The study presents an innovative economic framework and empirical results that provide insight into the distributional and incentive effects of the biotechnology IPR.

References

Evenson R.E., and Y. Kislev. Agricultural Research and Productivity. New Haven, Conn.: Yale University Press, 1975.

Evenson R.E., and Y. Kislev. "A Stochastic Model of Applied Research." Journal of Political Economy. 84 (1976): 265-281

Ulrich, A., W.H. Furtan, and A. Schmitz. "The Cost of a Licensing System Regulation: An Example from Canadian Prairie Agriculture." Journal of Political Economy. 95 (1987): 160-178.

Fulton, M.E., and L. Keyowski. "The Impact of Technological Innovation on Producer Returns: The Case of Transgenic Canola." Presented at the NE-165 conference Transitions in Agbiotech: Economics of Strategy and Policy. Washington, DC, June 24-25, 1999.

Nelson, P.J. "Information and Consumer Behavior." Journal of Political Economy 78 (1970): 311-29.

Stigler, G.J. "The Economics of Information." Journal of Political Economy 69 (1961): 213-25.


 

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