Agriculture Reference
In-Depth Information
characteristics within agricultural species would qualify as biotechnology.
More narrowly, what
biotechnology
represents today is new knowledge about
the natural processes of DNA replication, breakage, ligation, and repair that
has made possible a deeper understanding of the mechanics of cell biology and
the hereditary process itself (McCouch, 2001). Over the last 20-30 years, the
term “biotechnology” in agriculture has been most closely associated with
genetic engineering
, but it may refer to a variety of techniques and products,
including the use of molecular markers in genetic improvement or more
general use of genomic information.
Although these modern techniques may appear to be simply additions to
the genetic improvement toolkit, from an economic perspective, genetic engi-
neering in particular has meant the development of three complementary
markets: the traditional market for improved germplasm (or seed), the market
for genes conferring traits that can be used to capture value, and the market for
platform technologies or research tools. Intellectual property has become more
prominent as a means of protecting traits, tools, and, to a certain extent,
germplasm. Much of the merger and acquisition activity within the crop seed
industry, as well as some research alliances and licensing agreements, is moti-
vated by the desire to obtain access to products from all three of these markets,
which are necessary for the final product of GM seed (Graff et al., 2003; King
and Schimmelpfennig, 2005; and Marco and Rausser, 2008).
Kalaitzandonakes and Bjornson (1997) argue that more well-defined and
stronger intellectual property rights would have encouraged greater use of
contracting and licensing arrangements and thus reduced the level of mergers
and acquisitions.
In addition to intellectual property and R&D costs, costs of regulatory
approval for agricultural biotechnology products constitute another type of
fixed cost that can create barriers to market entry and thus influence industry
concentration (Fulton and Giannakis, 2002). Kalaitzandonakes et al. (2006)
estimate compliance costs for guiding a single genetic engineering event, for
either insect-resistant corn or herbicide-tolerant corn, through the regulatory
process at between $6 million and $15 million. Heisey and Schimmelpfennig
(2006) argue that through the mid-2000s, the combination of desired char-
acteristics and development of marketing and distribution networks were
stronger determinants of industry concentration than regulation. However, it is
likely that longer regulatory delays (Kalaitzandonakes et al., 2006) and
regulatory costs for generic firms
16
as GM traits come off patent (Just, 2006)
will have increasing effects on industry structure. Furthermore, the relative
impact of regulatory costs might vary across crops as well as across countries
