The International Consortium on Agricultural Biotechnology Research (ICABR)

 

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"Collaborative Agreements in the Ag-Biotechnology Industry: The Importance of Transaction Costs and Investment Strategy".
by
Peņa, Iņaki
Akridge, Jay T.
Boehlje, Michael

The number of collaborative agreements and strategic alliances in the ag-biotech industry has increased considerably in recent years; an industry which in turn is characterized by a highly uncertain environment. Two research streams in the domain of strategic management seem to be particularly useful for examining business investment transactions in the ag-biotechnology industry.

With the emergence of a new cycle of business acquisitions, divestitures, and strategic partnerships, the process of consolidation in the field of agriculture still continues its course during the nineties. Apparently, competition is no longer only an issue of rivalry among firms, but an issue of rivalry among inter-organizational networks (or alliances) and contending technological fronts. In addition to learning how to deal with uncertainty, agribusiness firms need today to learn how to partner with other companies. Examples of "biotech-biotech", "seed-biotech", "biotech-agchemical", and other multiple combinations of inter-organizational arrangements abound both in domestic and foreign markets.

The purpose of this study is to address important issues related to inter-firm collaboration and creation of technological networks. Transaction cost economics is an appropriate perspective that relates the adequacy of a governance form embedded in a business transaction to factors associated with uncertainty and partners’ opportunistic behavior. The research domain of strategic alliances examines the strategic motives for investing in new inter-firm relationships. This study will combine both views to analyze the formation of collaborative agreements in the ag-biotechnology sector.

The unit of analysis of this study is the individual collaborative agreement or business transaction. Different data sources (i.e., Bioscan, Merger and Acquisitions, US Patent and Trademark Database, company annual reports, and Agricultural Statistics) are used to create a sample of over 400 business investment transactions for the 1993-97 period and develop variables for empirical test. Cox regression (i.e., hazard function and survival analysis) and discriminant analysis will be conducted to examine the determinants of each governance form (i.e., acquisitions, equity agreements, non-equity agreements).

Results are expected to provide insights on issues concerning the formation of collaborative agreements. Corporate managers will benefit of a better understanding about factors affecting business investment strategies. Findings are also expected to shed light to policy makers regarding the importance of cooperation, not only competition, for the emergence and development of new agricultural technologies.