Staff Paper, Cornell University, Department of Applied Economics and Management 2005-05
What makes or breaks the decision for an MNC to enter an emerging market beyond incentives for profit-maximization? What role exists for public-private partnerships as a mechanism for value capture in agricultural biotechnology investments into uncertain markets? The objective of the paper is to provide the necessary theoretical framework by which future research may empirically assess the discounted value and probability of R&D investments into the African agricultural biotechnology sector. A partnership model lies at the foundation for creating marketing channels between industries with high fixed costs and high social utility value. Stimulating intellectual and scientific investments in agricultural biotechnology are contingent on prioritization of public policy, wherein optimal investment strategy into developing markets becomes a balance between providing adequate incentives for investment without compensating technological dissemination to smallholders. A strong regulatory environment not only ensures market power for the private industry and but forces change in the general expectations from and attitude towards the hybrid seed and agriculture innovation. It is, additionally, imperative to create a linkage between the private sector and the smallholder. Not only are multinationals currently the gatekeepers of intellectual capacity for agricultural biotechnology research, but also possess capacity to enter the market and provide products en masses. The lack of immediate profit incentives may be balanced by public sector partnerships that might cushion risks and eventually expand market opportunities for the smallholder.