The International Consortium on Agricultural Biotechnology Research (ICABR)
Biotechnology, GMOs, and the
Organization of the Food System
Robert D. Weaver* and Taeho Kim*
Pennsylvania State University
Research and development costs of genetically modified organisms (GMOs) may be difficult to recover through traditional market-based pricing. Crop improvement through conventional crop breeding has shown us that producers are not willing to pay substantial or continuing fees for innovations. Crop chemicals have similarly shown short-lived horizons for pricing that generates a return to R&D. A further complication faced by GMOs is that consumer response to GMOs to date has suggested strong aversion for products of GMO origin could occur. Shoemaker et al. review survey results that allow comparison of consumer response between the U.S. and E.U. These results suggest that U.S. consumers have little concern for GMO technology of origin. However, strong preferences against GMO technology of origin found in E.U. and Japanese markets paints an important picture of possible conditions that could emerge in the U.S. This is particularly important to recognize when further survey results are considered that indicate low levels of knowledge held by U.S. consumers (Hoban and Katic), and case specific differences in concern and reaction based on health risk feelings as well as ethical concerns.
For crops with substantial markets, private incentives have resulted in extensive application of biotech and genetic engineering methods. However, it is of interest to question whether marketing methods for these products and their implications for incentives for R&D stimulate optimal levels and rates of R&D from a social perspective. Shoemaker et al. note substantial evidence that patent-based incentives has led to increased concentration in seed and chemical input industries. For many applications, these economics have led private R&D efforts to seek profits elsewhere, leaving performance failures uncorrected and opportunities for enhancing performance unfulfilled by the private sector. Where social value is perceived, these needs and opportunities have traditionally been pursued by public sector R&D. However, the current political and social perspectives with respect to GMOs in many developed and developing countries may curtail public sector involvement in GMO R&D.
This paper considers the economic performance of private versus public sector GMO R&D in the food supply chain by identifying the characteristics of GMO performance that will be of interest as targets of private sector R&D. To proceed, we first consider the a taxonomy of biotech-related innovations by considering their impacts on the food supply chain. Next, the profitability of these biotech-related innovations within the food supply chain is considered to establish the existence and location in the supply chain of appropriable private benefits from R&D. It follows that when conditions suggest appropriable private benefits, mechanisms can be defined through which owners of intellectual property rights (IPRs) can appropriate the economic benefits generated by the innovation. By implication, those types of biotech innovations that will likely not attract private sector R&D effort will be identified as a potential realm for public sector R&D effort. Third, the implications of the nature of the appropriability of the private benefits of biotech innovations for industry organization (vertical integration, contracting, licensing, etc.) are considered. In a fourth step, left for another paper, the implications of the findings of this paper for public policy and regulation will be considered.