Intellectual Property Protection And The International Marketing Of Agricultural Biotechnology: Firm And Host Country Impacts

The protection of intellectual property rights has been a contentious issue over the last 20 years. Industrialized nations have moved to knowledge-based economies and simultaneously trade barriers have fallen, making intellectual property vulnerable. Adding to this vulnerability are conflicting international institutional environments, belief systems, and economic realities. The debate over IPR protection has become a significant global trade issue pitting the net- technology producing North against the net-technology consuming South. The North maintains a comprehensive IPR institutional environment and actively employs enforcement mechanisms. The South on the other hand, is more conflicted. While in the last ten years many Southern countries have agreed to multilateral agreements on IPR protection, enforcement and real commitment has been lagging. With this in mind there has been much debate about the impact of alternative IPR regimes (tight or loose) on the welfare of Southern economies. Policy makers in both the South and the North search for arguments to convince recalcitrant Southern countries to follow the Northern model of strict IPR regimes. The South faced with a dilemma, searches for arguments to justify loose IPR regimes or alternatively to convince its populace that tighter IPR regimes are better for the nation. While there has been much analytical work, mostly theoretical, conducted on the subject, the final results are inconclusive whether a strong IPR regime is better or worse for Southern countries. The lack of clarity as to the impact of IPR regime has in part been due to the level of analysis. The theoretical models, while being extremely valuable highlighting the drivers of firm and social welfare, are by their nature abstractions and have produced contradictory conclusions. The empirical models have been limited focusing on either secondary aggregated data and proxy variables to uncover the relationship between IPR and economic outcome or qualitative surveys asking managers to describe the impact of weak IPR. One of the predicaments of empirical analysis in this area is trying to measure or assess the investment not made. For example in some research, investigators are forced to asked business leaders hypothetical questions as to what might they do if the institutional environment were different, i.e. IPR were protected. Our research takes a different empirical approach using the case study method and the unique setting of the corn and soybean seed business to actually measure how the lack of IPR protection distorts the strategy and investment behavior of a firm. Due to the agronomic differences between corn and soybeans, corn is naturally protected from IPR pirating while soybeans are not. In a Northern setting, the business are run in parallel with similar investment, human resource needs, and marketing strategies. In a Southern setting we hypothesize that there will be significant and measurable differences due to the firms' inability to protect its intellectual soybean technology. This research will document and quantify the impact on the firm. The firms' behavior indirectly effects the country as it shifts it physical and human capital investment. This too will be quantified. Finally the welfare gain to farmers from lower prices and wider access to new biotechnologies will also be empirically measured. Our research empirically analyzes hypotheses derived from the current theory on IPR with the purpose of providing evidence on the welfare impacts of weak IPR. The empirical setting is Pioneer Hi-Bred a global leader in agricultural seed production and sale. We focused on the Argentinean division which is uniquely appropriate for the study of the IPR question. The two leading products of Pioneer are corn and soybeans. These crops are complements and are used in rotation. Corn's intellectual property is naturally protected from piracy by the hybridization process. Because it is self-pollinating, soybeans (and the valuable Roundup Ready® technology) are very vulnerable. The study used the following sources of evidence: key informant interviews, direct observation, and quantitative data (financial documents analysis and industry statistics). The informant interviews were conducted using a semi-structured interview instrument on managers and field staff within Pioneer, managers of competing firms, government officials, trade associations, seed distributors and multipliers, and producers. Direct observation was conducted on location at Pioneer R&D, production and distribution facilities. Financial document analysis was conducted using balance sheet, and income data at the business unit level and internal marketing research documents provided by Pioneer as well as secondary data on the industry. All interviews and site visit were digitally videotaped. Interviews were then transcribed and analyzed using QSR NUD-IST®, a text analysis software tool. We hypothesize that there will be sharp differences between the corn and soybean business units not found in a Northern setting. These differences will reflect the "investment not made" that has been so elusive to other empirical studies. Theory predicts that there will be differences in quality and quantity of infrastructure investment, differences in supply chain relationships, differences in resource needs, differences in human resource management, and differences in financial performance. At the firm level if such differences exist it would indicate that there are different business strategies for different IPR environments even though the traded products are identical. Finally and equally important the study will measure the impacts on the host country in terms of human capital, under investment, reduced cash flow, and smaller knowledge spillovers. These impacts plus the welfare gains from lower prices and wider product distribution will comprise our assessment of the economic impact of weak IPR.