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The Coordination of Agricultural R&D in the U.S. and Germany: Markets Versus Networks

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Modeling, Dynamics, Optimization and Bioeconomics II (DGS 2014)

Part of the book series: Springer Proceedings in Mathematics & Statistics ((PROMS,volume 195))

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Abstract

Making money out of knowledge is a more difficult venture than it might seem due to defining characteristics of knowledge: non-rivalry and non-excludability in consumption. We argue that institutional attempts to overcome this difficulty in knowledge commodification shape the type of technological innovation in an economy. We suggest that two coordination types of R&D can be found: coordination by the market and coordination by networks. Empirically, our analysis is based on a mixed methods approach. We combine qualitative interviews with employees of seed companies in the U.S. and Germany, historical records, and descriptive quantitative analysis of yield developments in several crops. Finally, we compare market concentration in the U.S. and Germany. Our results indicate that coordination of agricultural R&D by the market (as in the U.S. since the 1980s) fosters innovations that are based on explicit knowledge. Furthermore, coordination by the market privileges large companies, tends to lead to a strong market concentration, and limits the development efforts on a few commercially beneficial crops. Coordination of agricultural R&D by networks (as in Germany), on the other hand, fosters innovations that are based on implicit knowledge and privileges medium-sized handcraft-based companies, which maintain innovation activities in a larger spectrum of crops. We conclude that the ban of transgenic seed in Europe cannot only be explained by the consumer protest but might also root in the institutional structure that coordinates agricultural R&D.

This paper is a revised and shortened version of our paper “Spielarten des Wissenskapitalismus. Die Kommodifizierng von Saatgut in USA und Deutschland”, published in Leviathan 2014, 42(4): 539–572.

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Notes

  1. 1.

    We interviewed approximately 60 persons who were located in the U.S. and in Germany. As experts we regard mangers of breeding firms/agrochemical companies, breeders, scientists at universities in the field of Biology, members of governmental authorities, and farmers.

  2. 2.

    Ideally, one would have one common data source. However, given the before mentioned data limitation, there is no data source that includes market data both from Germany and the U.S. A further limitation is that the seed approval procedure is not harmonized within the European Union. Hence, seed sorts approved in other European countries may also be traded in the German market. However, according to our interview partners, a German approval functions as a quality signal for the German market and therefore, bias should be small. This is not the case for maize, and therefore, we rely on the data from the Maize Committee for this crop. In general, reliable inferential data analysis would demand panel data on the firm level, which is not available for any country [13]. Hence, we provide descriptive and preliminary results. Nevertheless, we carefully selected data available and believe we are able to show general tendencies.

  3. 3.

    The Plant Patent Act from 1930 only applies to a-sexual reproduced plants, which means that basically all crops are excluded.

  4. 4.

    The five companies are: NPZ Lemke, DSV, W.v. Borries-Eckendorf, Raps GbR, and KWS Saat. In 2011 Bayer acquired Raps GbR. Other companies perceived this acquisition very negatively. Until now however, this acquisition did not change the market structure. Thus, the market share of Raps GbR was very small, anyway.

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Authors and Affiliations

  1. Rachel Carson Center, Ludwig Maximilian University of Munich, Munich, Germany

    Barbara Brandl

  2. Graduate School of Economic & Social Sciences (GESS), University of Mannheim, Mannheim, Germany

    Katrin Paula

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  1. Department of Mathematics and LIAAD-INESC TEC, University of Porto, Porto, Portugal

    Alberto A. Pinto

  2. Department of Agricultural and Resource Economics, University of California, Berkeley, California, USA

    David Zilberman

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Brandl, B., Paula, K. (2017). The Coordination of Agricultural R&D in the U.S. and Germany: Markets Versus Networks. In: Pinto, A., Zilberman, D. (eds) Modeling, Dynamics, Optimization and Bioeconomics II. DGS 2014. Springer Proceedings in Mathematics & Statistics, vol 195. Springer, Cham. https://doi.org/10.1007/978-3-319-55236-1_5

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