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The Crowding Effects of Basic and Applied Research: A Theoretical and Empirical Analysis of an Agricultural Biotech Industry

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  • Stavroula Malla
  • Richard Gray

Abstract

Game theory is used to examine the incentives for private firms to fund applied research to improve differentiated crop varieties sold to compete with a public generic variety. We distinguish between applied research, modeled as a stochastic search process, and basic research, which improves applied research productivity. Propositions derived from the theoretical model are tested using empirical evidence from the canola crop research industry. The results show consistency between the analytical findings and the econometric results, supporting the validity of the framework and underlining the need to disaggregate the crowding effects of basic and applied public research. Copyright 2005, Oxford University Press.

Suggested Citation

  • Stavroula Malla & Richard Gray, 2005. "The Crowding Effects of Basic and Applied Research: A Theoretical and Empirical Analysis of an Agricultural Biotech Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(2), pages 423-438.
    • Handle: RePEc:oup:ajagec:v:87:y:2005:i:2:p:423-438
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2005.00732.x
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    Citations

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    Cited by:

    1. Jeremy Jay Jackson & Jason Smith, 2015. "A framework for non-drastic innovation with product differentiation," Economics Bulletin, AccessEcon, vol. 35(1), pages 259-269.
    2. Amponsah, Lawrence, 2016. "Modelling the effect of public investment on agricultural productivity in Ghana," MPRA Paper 70924, University Library of Munich, Germany.
    3. Seyed H. Hosseini & Richard Gray & Mohammad Torshizi, 2019. "Cross‐licensing agreements in presence of technological improvements," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 67(1), pages 115-130, March.
    4. Gray, Richard & Malla, Stavroula, 2007. "Research Spillovers What They Are and Why They Matter for Policy," CAIRN Policy Briefs 273075, Canadian Agricultural Innovation and Regulation Network (CAIRN).
    5. Mehdi Arzandeh & Derek G. Brewin, 2021. "R&D Investments in Plant Breeding under Changing Intellectual Property Rights," International Journal of Economics and Financial Issues, Econjournals, vol. 11(6), pages 32-47.
    6. Benin, Samuel, 2015. "Returns to agricultural public spending in Africa south of the Sahara:," IFPRI discussion papers 1491, International Food Policy Research Institute (IFPRI).
    7. Mohammad Torshizi & Richard Gray, 2022. "Adaptability and variety adoption: Implications for plant breeding policy in a changing climate," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(4), pages 842-859, October.
    8. Stavroula Malla & Derek G. Brewin, 2020. "Biotechnology, Crop R&D and Public Policy: The Case of Canola," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 6(2), pages 99-110, April.

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