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AgBioForum Volume 11 Number 2

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Columbia, Missouri
January 2009

AgBioForum Volume 11 Number 2
Nicholas Kalaitzandonakes, Editor

TABLE OF CONTENTS

Insiders' Views on Business Models Used by Small Agricultural Biotechnology Firms: Economic Implications for the Emerging Global Industry
S. Blank

The source of most innovations coming from the emerging agricultural biotechnology industry is small and medium enterprises (SMEs), yet SMEs have a high failure rate, which raises questions, such as “is there some flaw in the business structure of firms in the industry?,” or “is the economic and policy environment facing the industry not conducive to supporting SMEs?” The types of business models used by SMEs across the globe are identified using “insider information” collected from interviews of senior managers. Results have implications for economic development because the economic and policy environment is found to be the constraint.

An Ex-ante Evaluation of the Economic Impact of Bt Cotton Adoption by Spanish Farmers Facing the EU Cotton Sector Reform
M. Ceddia, M. Goméz-Barbero & E. Rodríguez-Cerezo

Cotton production in the European Union (EU) is limited to areas of Greece and Southern Spain (Andalusia). The 2004 reform of the EU cotton policy severely affected the profitability of the crop. In this article we analyze how the introduction of genetically modified (GM), insect-resistant cotton varieties (Bt cotton) might help EU cotton farmers to increase profitability and therefore face the cotton policy reform. We first study farmers' attitudes toward adoption of Bt cotton varieties through a survey conducted in Andalusia (Southern Spain). The results show a positive attitude of Andalusian cotton farmers toward the Bt cotton varieties. Second, we perform an ex-ante analysis of the effects of introducing Bt cotton in Andalusia. Finally, we integrate the analysis of the effects of Bt cotton with the analysis of the EU cotton reform. Our results show that despite the significant economic benefits of Bt cotton, the current policy reform is likely to jeopardize the profita!
bility of cotton production in the EU.

Trust and Distrust in Biotechnology Risk Managers: Insights from the United Kingdom, 1996-2002
H. James & L. Marks

During the late 1990s, negative events related to biotechnology were reported in the UK media. According to the trust asymmetry hypothesis, such events should cause public trust in biotechnology risk managers to decline rapidly and rebound slowly. Using Eurobarometer data we show that public trust in risk managers declined from 1996 to 1999 but rebounded sharply between 1999 and 2002. Using canonical discriminant analysis we find that trust is correlated with knowledge of science, as well as perceptions of benefits and risks. We also identify distinct categories of people who do not trust--people who distrust risk managers but trust other sources of biotechnology information, people who trust nobody, and people who are uncertain about their trust of risk managers. We argue that attention should be placed not only on understanding how to improve trust but also on the nature and characteristics of people who distrust risk managers of biotechnology.

Public Attitudes Toward Molecular Farming in the UK
R. Milne

Plant-made pharmaceuticals represent the third generation of genetically modified crops as well as a potentially significant development in pharmaceutical and vaccine manufacturing. Successful development is contingent on a number of factors, one of which is social acceptance. This article outlines the results of a focus group study conducted in the UK on public attitudes toward molecular farming. It finds that attitudes are predominantly positive. Judgments about molecular farming are made in terms of perceived need and benefits, not limited to the participants themselves. Concerns do exist about whether molecular farming represents the best approach to pharmaceutical production, which diseases are targeted, and whether it can be controlled and contained. While participants are unfamiliar with molecular farming, they draw on a range of existing knowledge and examples to anchor their understandings of it.

How External Political-Economic Forces Affect Firms' Attitudes Toward the Industrial Use of Genetically Modified Organisms: An Analysis in the South Korean Context
B. Sung & H. Jang

Based on survey data, this article investigates the effects of external political-economic forces on firms' attitudes toward the industrial use of GMOs in the South Korean context by performing an ordered probit regression analysis. The survey, covering 240 firms, was conducted from November 15, 2005 through December 17, 2005. Results indicate that external political-economic pressures derived from government, consumers, industry, and markets were important for promoting firms' industrial use of GMOs. The most important variables (listed in order of decreasing importance) were market attractiveness, competitive intensity, consumer acceptance, and regulatory intensity in terms of the coefficient. Hence, in South Korea, to promote firms' industrial use of GMOs, the highest priority must be given to policy measures promoting market circumstances securing high profits. And these should be followed by policies that induce inter-firm competition, obtain consumer acceptance, and develop government regulations that are not a burden to firms. NGOs pressures (i.e., NGOs objection), firm's size, and dummies for firm types (i.e., food industry vs. others) were not significant factors affecting firms' attitudes towards the industrial use of GMOs.

Does Biotech Labeling Affect Consumers' Purchasing Decisions? A Case Study of Vegetable Oils in Nanjing, China
W. Lin, F. Tuan, Y. Dai, F. Zhong & X. Chen

This study analyzes whether biotech labeling has an impact on consumers' purchasing behavior in China using vegetable oils in Nanjing as a case study. An Almost Ideal Demand System (AIDS), which encompasses expenditure shares of individual edible oils, is developed and estimated by seemingly unrelated regression with theoretical constraints. The AIDS model is augmented by the top-level demand for all edible oils in the context of a two-stage budgeting approach. Results from the model based on retail scanning data suggest that biotech labeling induced only a modest switch in vegetable oils consumption away from labeled soybean and blended oils and toward non-biotech vegetable oils.

Pricing and Welfare Impacts of New Crop Traits: The Role of IPRs and Coase's Conjecture Revisited
R. Perrin & L. Fulginiti

Crop traits are durable when embedded in varieties, and thus they may be subject to Coase's conjecture that monopolists who sell durables may be unable to earn normal monopoly rents, or in the extreme case, not any rents at all. To determine the potential relevance of this conjecture for the crop traits market, we analyze the theoretical time path of trait prices under three systems of intellectual property rights (utility patents, plant breeders' rights, and none), alternative assumptions about sellers' ability to commit to future action, and alternative assumptions that buyers are either myopic or far-sighted with respect to expectations about the future price of the durable. Under only one of these stylized circumstances does the Coase conjecture have traction, but it is a plausible circumstance in much of the world--owners with plant breeders' rights, buyers with foresight, sellers unable to commit to future price paths. In this circumstance, this theory suggests that sellers holding only plant breeders rights would realize only 11% of potential social welfare benefits from the trait, while farmers and/or downstream consumers would realize about 85%. On the other hand, with myopic buyers under any system of intellectual property rights, temporal price discrimination is feasible, resulting in above-normal monopolist welfare (about 70% of maximum social welfare benefits) and little damage to consumers relative to normal monopoly pricing.

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