Competition and Innovation: Did Monsanto’s Entry Encourage Innovation in GMO Crops?

91 Pages Posted: 5 Apr 2015

See all articles by Petra Moser

Petra Moser

NYU Stern Department of Economics; National Bureau of Economic Research (NBER)

Paul Wong

Stanford University - Department of Economics

Date Written: April 3, 2015

Abstract

In 1996, the chemical firm Monsanto bought a plant breeder that had developed a new corn hybrid, which could withstand Monsanto’s powerful herbicide Roundup. Due to the pre-existing structure of the US plant-breeding industry, this acquisition and Monsanto’s acquisition of five other corn breeders meant that Monsanto had also entered soy breeding, in addition to corn. As a result, the market structure of the soy industry shifted from a quasi monopoly (by Pioneer Hi-Bred) to a duopoly with a competitive fringe. At the same time, Monsanto’s acquisitions created no significant change in the market structure for other crops, such as wheat or cotton. New data on field trials enable us to investigate the effects of these changes on innovation. These data indicate that Pioneer innovated less in response to Monsanto’s entry. Field trial data also show that the competitive fringe innovated less after Monsanto entered. Data on patent applications, however, indicate that Pioneer and the competitive fringe patented more, after Monsanto entered.

Keywords: innovation, competition, field trial, patent, genetically modified crop, GMO, Monsanto

JEL Classification: O31, L65, Q16

Suggested Citation

Moser, Petra and Wong, Paul, Competition and Innovation: Did Monsanto’s Entry Encourage Innovation in GMO Crops? (April 3, 2015). Available at SSRN: https://ssrn.com/abstract=2588330 or http://dx.doi.org/10.2139/ssrn.2588330

Petra Moser

NYU Stern Department of Economics ( email )

44 West 4th Street
New York, NY 10003
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paul Wong (Contact Author)

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

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