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The source of comparative advantage in the biotechnology industry: A real options approach

Author

Listed:
  • Brian F. Lavoie

    (Department of Agricultural, Environmental and Development Economics, The Ohio State University, 2120 Fyffe Road, Columbus, OH 43210)

  • Ian M. Sheldon

    (Department of Agricultural, Environmental and Development Economics, The Ohio State University, 2120 Fyffe Road, Columbus, OH 43210)

Abstract

Sources of heterogeneity within the process of research and development (R&D) investment, such as international differences in the maximum per-period rate of investment and level of regulatory uncertainty, offer a plausible explanation for US comparative advantage in biotechnology. Using dynamic stochastic simulation, the results presented in this article suggest US biotechnology firms may initiate more R&D projects, innovate earlier and more rapidly, persevere longer in the face of mounting R&D costs, and successfully complete more R&D projects than European firms [Econ-Lit citations: F100, O310, O330]. © 2000 John Wiley & Sons, Inc.

Suggested Citation

  • Brian F. Lavoie & Ian M. Sheldon, 2000. "The source of comparative advantage in the biotechnology industry: A real options approach," Agribusiness, John Wiley & Sons, Ltd., vol. 16(1), pages 56-67.
    • Handle: RePEc:wly:agribz:v:16:y:2000:i:1:p:56-67
    DOI: 10.1002/(SICI)1520-6297(200024)16:1<56::AID-AGR5>3.0.CO;2-S
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    References listed on IDEAS

    as
    1. Pindyck, Robert S., 1993. "Investments of uncertain cost," Journal of Financial Economics, Elsevier, vol. 34(1), pages 53-76, August.
    2. Krugman, Paul R, 1987. "Is Free Trade Passe?," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 131-144, Fall.
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    Cited by:

    1. Engel, Phoebe D. & Hyde, Jeffrey, 2003. "A Real Options Analysis of Automatic Milking Systems," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 32(2), pages 1-13, October.
    2. Demont, Matty & Tollens, Eric, 1999. "The Economics Of Agricultural Biotechnology: Historical And Analytical Framework," Working Papers 31845, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics.
    3. Lavoie, Brian F. & Sheldon, Ian M., 2000. "Market Structure In Biotechnology: Implications For Long-Run Comparative Advantage," 2000 Annual meeting, July 30-August 2, Tampa, FL 21835, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Sheldon, Ian M., 2008. "The Biotechnology Sector: "Bounds" to Market Structure," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6078, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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