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


  • K. Aparna Bhagirathy


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.

Suggested Citation

  • K. Aparna Bhagirathy, "undated". "Using Traditional Knowledge for Commercial Innovations: Incentives, Bargaining and Community Profits," Working papers 25, The South Asian Network for Development and Environmental Economics.
  • Handle: RePEc:snd:wpaper:25

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    References listed on IDEAS

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    4. Jeff Dayton-Johnson & Pranab Bardhan, 2002. "Inequality And Conservation On The Local Commons: A Theoretical Exercise," Economic Journal, Royal Economic Society, vol. 112(481), pages 577-602, July.
    5. Dasgupta, Partha & Maler, Karl-Goran, 1995. "Poverty, institutions, and the environmental resource-base," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 39, pages 2371-2463 Elsevier.
    6. Baland, Jean-Marie & Platteau, Jean-Philippe, 2003. "Economics of common property management regimes," Handbook of Environmental Economics,in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 4, pages 127-190 Elsevier.
    7. Baland, Jean-Marie & Platteau, Jean-Philippe, 1997. "Wealth Inequality and Efficiency in the Commons: Part I: The Unregulated Case," Oxford Economic Papers, Oxford University Press, vol. 49(4), pages 451-482, October.
    8. Paul Seabright, 1993. "Managing Local Commons: Theoretical Issues in Incentive Design," Journal of Economic Perspectives, American Economic Association, vol. 7(4), pages 113-134, Fall.
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