Technical efficiency and technology adoption in beef

Since the Second World War, the primary source of U.S. agricultural output growth has come from lifting productivity (Wang et al., 2015). Long-term investments in agricultural R&D appear as the predominate driver of those productivity gains (Alston and Pardey, 2021). Public research plays a critical role in the U.S. agricultural innovation process. From 1970 to the early 2000s, public research spending in the U.S. was nearly equal to private research spending, each amounting in 2002 to just under $6 billion (Wang et al., 2015, p. 41). However, Wang et al show that since 2002 when world commodity prices started climbing, a stark divergence between the two developed; by 2010, real public U.S. research spending fell to ~$5 billion and private research spending spiked to ~$9 billion. In the late 1990s and early 2000s, a new approach to funding U.S. innovation emerged: venture capital (VC) began to support newly-created firms to move promising inventions and business ideas from inception to commercialization (Kortum & Lerner, 2000; Arque-Castells, 2012). In agriculture, VC funding helps firms overcome high entry costs resulting from long-term research risk, spatial heterogeneity for applications, and economies of scale characteristic of many agricultural markets. In 2010, total VC investment in U.S. startups focused on farm production technologies was ~$400 million. By 2018, investment in VC-backed agricultural startups had grown to over $7 billion (Graff et al., 2020). In 2020, that investment was over $15 billion (AgFunder, 2021). Scholars hypothesize that VC investors became attracted to agriculture following the 2002 climb in commodity process, which increased farmers’ abilities to adopt new technologies and signaled to input suppliers that global demand may soon exceed supply (Fuglie, 2016). Others suggest a shift towards cleantech and biofuels in the 2000s introduced VC investors to agriculture amid an economy-wide surge in the financing of VC funds (Graff et al., 2020). It could be that the culmination of various general-purpose technologies (e.g., cloud computing, satellite imagery, vehicle automation, gene editing) opened technological opportunities in agriculture, as investors maximized economic benefits across multiple sectors of application (Olsson, 2005), including agriculture, given its historically high rates of return on research (Hurley et al, 2014). We explore the relationship between technological opportunity and the large exogenous shock in VC funding of agricultural startups. Specifically, we investigate the agricultural startup life-cycle. Within the cycle of firm birth, venture investment, and investor exit, what is the relationship between patents and firm financials? Do firms that patent have more successful financings and exits than those that patent little or not at all? In which industries/subsectors were technological opportunities pronounced? What are observed characteristics of the technological opportunity in agriculture? To investigate these issues, we began with a unique dataset of privately-held agricultural startups founded between 1977 and 2019. These unique startups were obtained from four commercial databases: Venture Source (now CB Insights), Crunchbase, Pitchbook, and CapitalIQ. Following a careful matching process, we identified 4,681 firms from PitchBook (49.26% of the sample), 3,399 from Capital IQ (35.77%), 1,312 firms from Crunchbase (13.81%), and 111 from VentureSource (1.17%). From these 9,503 firms, we narrowed to 7,287 distinct startups founded in the United States on or after 1987. Of these agricultural startups, we matched 6,084 to at least one establishment in the National Establishment Time Series (NETS) database, an 83.5% match rate. The NETS database is the most comprehensive source of establishment-level economic information for U.S. firms. Next, we matched the same set of agricultural startups to assignees listed in the USPTO’s pre-grant publication (PG Pub) and granted patent databases. Of those 6,084 agricultural startups matched to economic information in NETS, we find 10% (634 startups) have one or more published patent application or grant, and 36% (2,214 startups) have reported financing deals. Of the 634 startups with patent filing activity, 72% (458) report financing deals. We find a strong increase in the number of agricultural startups, both with and without VC investments, over the 1989-2019 period. Startups with VC grew, in terms of employment and sales, faster than startups without VC. We find substantial increases in patenting by the agricultural startups over time. Importantly, there has been great diversification of technology fields in which the startups patent, as well as of industry classifications in which startups operate, evidence of startups pursuing technological opportunity in agriculture. Among industries, we find the greatest increase of patenting by startups primarily classified in the manufacturing and professional, scientific, and technical services. Startups classified in these industries patented in Ag & Food, but also in biotech, chemicals, physics, electricity, and climate-change related new technologies. Next steps include detailing the timeline of firm birth, investment, and exit, and exploring causal and correlative relationships between patenting and VC-funded startups. REFERENCES AgFunder, 2021. AgFunder AgrifoodTech Investment Report. Available from: https://agfunder.com/research/2021-AgFunder-agrifoodtech-investment-report/ Alston, J., and P. Pardey, 2021. The Economics of Agricultural Innovation. In Handbook of Agricultural Economics, Eds., C. Barrett and D. Just. Vol. 5, Chapter 75, Elsevier Publishing. Arque-Castells, 2012. How Venture Capitalists Spur Invention in Spain: Evidence From Patent Trajectories. Research Policy (41): 897-912. Fuglie, 2016. The Growing Role of the Private Sector in Agricultural Research and Development World-wide. Global Food Security (10): 29-38. Graff, et al., 2020. Venture Capital and the Transformation of Private R&D for Agriculture. NBER Working Paper. Heisey and Fuglie, 2018. Public Agricultural R&D in High Income Countries: Old and New Roles in a New Funding Environment. Global Food Security (17): 92-102. Hurley, T., X. Rao, and P. Pardey, 2014. Re-Examining the Reported Rates of Return to Food and Agricultural Research and Development. American Journal of Agricultural Economics 96 (5): 1492-1504. Kortum, S., and J. Lerner, 2000. Assessing the Contribution of Venture Capital to Innovation. The RAND Journal of Economics (31): 674-692. Olsson, O., 2005. Technological opportunity and growth. Journal of Economic Growth 10: 35-57. Wang, S.L., P. Heisey, D. Schimmelpfennig, and E. Ball, 2015. Agricultural Productivity Growth in the United States: Measurement, Trends, and Drivers. Economic Research Report 189, Economic Research Service, U.S. Department of Agriculture. July.