Strategic Behavior and Consolidation in the Agricultural Biotechnology Industry

Posted: 11 Apr 2003

See all articles by Stanley R. Johnson

Stanley R. Johnson

Iowa State University - Department of Economics

Tigran A. Melkonyan

University of Maryland - Department of Agricultural & Resource Economics

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Abstract

We develop a model explaining the consolidation patterns in the agricultural biotechnology industry. Among different consolidation and cooperation mechanisms, we consider collaborative and licensing agreements, joint ventures, acquisitions, and exchanges of ownership and spin-offs. The key results derive from the benefits of coordinated actions, distinction between transferable and nontransferable payoffs, the substitutability, complementarity, and the importance of the managers' noncontractible investments, and access and expansion of markets. Results from the model are used to examine the cooperation and consolidation activities for four major players in the agricultural biotechnology industry, DuPont, Dow Chemical, Monsanto, and Novartis.

Keywords: Biotechnology, Consolidation, Incomplete Contracts, Property Rights, Research and Development

Suggested Citation

Johnson, Stanley R. and Melkonyan, Tigran, Strategic Behavior and Consolidation in the Agricultural Biotechnology Industry. Available at SSRN: https://ssrn.com/abstract=376525

Stanley R. Johnson

Iowa State University - Department of Economics

260 Heady Hall
Ames, IA 50011
United States

Tigran Melkonyan (Contact Author)

University of Maryland - Department of Agricultural & Resource Economics ( email )

Symmons Hall, Rm 2200
University of Maryland
College Park, MD 20742-5535
United States

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