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Using Traditional Knowledge for Commercial Innovations: Incentives, Bargaining and Community Profits

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  • K. Aparna Bhagirathy
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    Abstract

    The recent interest in traditional knowledge systems within health care and biodiversity sectors is directly related to the profitable innovations that traditional knowledge can generate. This paper seeks to examine the nature of economic incentives required for protecting and sustainably using traditional knowledge. The paper asks two key questions: (a) under what conditions do communities and pharmaceutical companies enter into contracts to develop traditional knowledge-based innovations? And, (b) what factors influence the benefit-shares of the two parties from commercial use of traditional knowledge? Adapting a bargaining model, this paper shows that the actual sharing of the revenues depends on a number of issues, most importantly, the relative bargaining strengths of the two parties. Factors that affect profits and relative bargaining strengths include the contributions of the parties in developing the innovation, the availability of alternative sources and options, differences in expectations over future revenues and costs, and the involvement of a third party in the negotiations. Such factors need to be taken into account in designing incentive schemes that can help communities benefit from the use of their traditional knowledge.

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    Bibliographic Info

    Paper provided by The South Asian Network for Development and Environmental Economics in its series Working papers with number 65.

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    Handle: RePEc:snd:wpaper:65

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    Postal: South Asian Network for Development and Environmental Economics PO Box: 8975, EPC: 1056 Kathmandu, Nepal

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    1. Baland, Jean-Marie & Platteau, Jean-Philippe, 2000. "Halting Degradation of Natural Resources: Is There a Role for Rural Communities?," OUP Catalogue, Oxford University Press, number 9780198290612, September.
    2. Dayton-Johnson, Jeff, 2000. "Determinants of collective action on the local commons: a model with evidence from Mexico," Journal of Development Economics, Elsevier, vol. 62(1), pages 181-208, June.
    3. E. Somanathan & R. Prabhakar & B.S. Mehta, 2002. "Collective action for forest conservation: Does heterogeneity matter?," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 02-01, Indian Statistical Institute, New Delhi, India.
    4. Holden, Stein T. & Shiferaw, Bekele & Wik, Mette, 1998. "Poverty, market imperfections and time preferences: of relevance for environmental policy?," Environment and Development Economics, Cambridge University Press, vol. 3(01), pages 105-130, February.
    5. Salvatore Di Falco & Charles Perrings, 2003. "Crop Genetic Diversity, Productivity and Stability of Agroecosystems. A Theoretical and Empirical Investigation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(2), pages 207-216, 05.
    6. Alexander Karaivanov, 2009. "Heterogeneity, returns to scale, and collective action," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 771-807, May.
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