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The Source Of Comparative Advantage In The Biotechnology Industry: A Real Options Approach

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  • Lavoie, Brian F.
  • Sheldon, Ian M.

Abstract

Sources of heterogeneity within the process of 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 paper 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.
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Suggested Citation

  • Lavoie, Brian F. & Sheldon, Ian M., 2000. "The Source Of Comparative Advantage In The Biotechnology Industry: A Real Options Approach," Transitions in Agbiotech: Economics of Strategy and Policy, June 24-25, 1999, Washington, D.C. 26019, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance.
    • Handle: RePEc:ags:rpsniw:26019
    DOI: 10.22004/ag.econ.26019
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    File URL: https://ageconsearch.umn.edu/record/26019/files/n165997.pdf
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    References listed on IDEAS

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

    1. 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.
    2. 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.
    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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