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BIT OF BACKGROUND-
Scientific advances in biotechnology, globalization of food and agricultural markets, stronger legal protection for intellectual property, and changes in agricultural and regulatory policies have affected the incentives for private industry to invest in food and agricultural research and development (R&D) worldwide.
It involves the unbiased collection, organization and analysis of information to increase understanding of a topic or issue. A research project may be an expansion on past work in the field.
Methods for measuring the economic impact of agricultural research include econometric approaches in which productivity differences over time or across countries are modeled as a function of research expenditures and other variables, and case studies that select a particular innovation and use microeconomic (farm level) data to examine its effect on farm productivity, costs and returns.
Private agricultural R&D spending increased, but the industries that supply agricultural inputs—such as seeds, chemicals, and machinery—to farmers have undergone significant structural transformations.
Although most private food and agricultural R&D spending is by companies based in high-income countries, important changes have also taken place in developing countries, partly due to investments by multinational corporations (MNCs) and partially due to the emergence of local companies with significant technological capacities.
Private agricultural organization -Research and Development performed by the business sector to develop new technologies for crop, livestock, fisheries, and forestry production.
The private business sector includes private and state-owned or state-controlled enterprises, so long as they sell their products to the market.
It also includes trade associations that provide services to the business sector.
The relative importance of the private sector in transferring agricultural technology across national borders, especially from developed to developing countries.
Private research also increases agricultural output by improving total factor productivity. TFP grows when the quality of conventional inputs improves, such as when a superior chemical or machine is developed.
PRIVATE R & D IN AGRICULTURE WORLDWIDE: Global investment by the private sector in agricultural R&D has been rising faster than public spending on agricultural R&D for at least the past three decades. Contributions to agriculture from private research are partly captured by the increased use of modern inputs like fertilizer and machinery.
The contribution to agricultural growth due to increased use of modern inputs is given by the growth rate in input use times its factor shares.
To capture technology spill-ins from the international agricultural research centers, they included as an explanatory variable the share of cropland planted with high-yielding varieties (HYV) of rice and wheat.
It is found that while public research and extension contributed most to productivity growth, private research accounted for about 11% of productivity growth over the whole period. The diffusion of HYV was also an important contributor to TFP but less important than private research.
In the decades immediately following World War II, private agricultural research focused primarily on farm machinery and agricultural chemicals.
By 2000, private R&D on seed and biotechnology had grown to more than half of total private agricultural.
Increase in seed and biotechnology research represented a substitution of biological technology for chemical technology [especially the development of genetically modified (GM) crops for insect resistance (IR)], although some of the increase was oriented toward technologies that complemented chemical pest control (GM Crops for Herbicide tolerance).
Research and development by the farm machinery industry also experienced rapid growth in recent years, doubling in real terms between 2005 and 2010.
This increase is partly due to the integration of new information technologies with farm machinery operations such as autopiloting and precision agriculture.
In Developing countries (INDIA)-
Many local agricultural input manufacturers in developing countries have initiated or increased their R&D investments, and together with R&D investments by MNCs, such investments represent a significant and growing proportion of agricultural research in developing countries.
Evidence from India shows that total private agricultural research (agricultural research by input industries plus agricultural research by plantation and food processing companies) increased from $24 million in the mid-1980s to $250 million in 2008–2009 in constant 2005 US$ (Pray & Nagarajan 2014).
Among these industries, the seed and biotechnology industry spent the most on R&D in 2008–2009 and grew the fastest, with real R&D spending rising from $5 million in the mid-1990s to almost $90 million by 2008–2009.
The farm machinery industry also grew rapidly, to approximately $40 million in 2008–2009.
Agricultural pesticide R&D grew less rapidly— “only” doubling between the mid-1990s and 2008–2009.
Private R&D on animal agriculture (poultry breeding, feed research, and veterinary research) increased by a factor of four between the mid-1990s and 2008–2009, reaching $26 million.
Determinants of the Profitability of Private research and development:
Profit-maximizing firms invest in R&D up to the point at which the marginal cost of research just equals the firm’s expected marginal revenue, appropriately adjusted for risk and the time lag between when costs are accrued, and revenue realized.
Three main factors influence the returns to private research:
The size of the market for a new technology, the R&D costs of developing the new technology (which is a function of the state of applied science,
The cost of R&D inputs, and the time and cost for regulatory approvals), and
The degree of appropriability (the share of total economic benefits of the new technology that the firm can capture).
Advances in molecular genetics opened up new technological opportunities in biotechnology and, together with new patent protections for biological inventions (which strengthened appropriability), stimulated growth in private sector investment in seed improvement.
The public sector, through research at universities, national laboratories, and international centers, contributed to this process by developing improved genetic resources, genomic information, and molecular tools.
Universities also contribute to private research through training the science and technology (S&T) workforce. A larger supply of S&T workers reduces R&D input costs for private firms, further raising the return to their R&D investments.
Changes in environmental and safety regulations have also influenced the pursuit of food and agricultural R&D. Regulations on new chemical and biological technologies may have increased overall R&D spending by firms to meet these requirements but diminished rates of innovation as a larger proportion of R&D funds was redirected from discovery research to meet regulatory requirements.
In addition, regulations may create barriers to entry for new firms. In crop biotechnology, high fixed costs and longtime lags in meeting regulatory requirements reduce incentives for private firms to develop new traits for small, heterogeneous markets, such as horticulture.
Reciprocals between public and private organizations:
A number of recent empirical studies attempt to characterize the nature of agricultural R&D and interactions of agricultural R&D between the public and private sectors.
Complementarity takes place when public R&D investments stimulate additional private R&D investments (and vice versa).
Substitution, or crowding out, takes place when public R&D supports activities that would otherwise have been carried out by the private sector. Substitution is more likely when public and private researchers work in the same topical areas (e.g., plant breeding, seed production) and conduct research that is of the same nature and with similar objectives.
Private agricultural R&D has dominated food manufacturing and farm machinery, whereas public agricultural R&D has addressed a broad set of socially important issues like environment and natural resources, food nutrition and safety, economics and statistics, and community development, for which incentives for private agricultural R&D are particularly weak.
In crop Research and development, much of the private agricultural R&D effort is oriented toward developing chemical compounds for use against crop pests and diseases, technologies without direct counterparts in public agricultural R&D.
Similarly, in animal R&D, private agricultural R&D has devoted much of its attention to developing animal health pharmaceuticals, a component of animal production technology for which the public sector generally does not offer competing products.
The Science and technology domain with the greatest potential overlap between public and private agricultural R&D is the genetic improvement of crops and animals.
The species that are ones for which hybrid technology has provided a novel way of protecting intellectual property in biological innovations (by restricting access to parent breeding lines), even before formal intellectual property rights (IPR) were available for new breeds or cultivars.
It is found that individual scientists tended to specialize in their sources of research funding and that an increase in private funding led to a decrease in public funding (and vice versa) for that scientist. Such developments could cause crowding out in funding sources in the short run but would likely not affect the system level over the long term, given entry and exit possibilities of new scientists.
Complementarity between public and private agricultural research suggest that the public sector responded to the changing market and institutional environment by reallocating its research portfolio in a way that avoided direct competition.
Evolution of agricultural input use in India
In India, farm purchases of quality seeds, fertilizers, and tractors have risen steadily over the past 40 years.
This growth in demand for modern inputs was driven by the rapid growth in demand for food and fiber, which in turn was driven by rising population and per capita income, changing consumer tastes, and the modernization of India’s supply chains.
Export demand for tractors and pesticides manufactured in India has also grown because India is a low-cost producer of these products.
A second factor that helped incentivize private agricultural R&D was policy reforms that liberalized agricultural input sectors.
Until the 1980s, India restricted the production and distribution of seed, pesticide formulation, and agricultural implements to state-owned enterprises, small manufacturers, and cooperatives.
Imports of most inputs except fertilizer were banned or faced high tariffs.
In the late 1980s, the Indian government started allowing large domestic and foreign privately owned firms to participate in the seed market.
It also allowed vegetable seeds to be imported. In the 1990s, foreign companies were allowed to have majority ownership in agri-businesses.
Meanwhile, government support to state-owned pesticide, farm machinery, and seed enterprises was reduced, and some of these enterprises were privatized.
Fertilizer is one sector in which state-owned enterprises still command a large market share in India—approximately 50% in 2008–2009.
Farmer demand for GM and hybrid cotton seed turned the cotton seed market into the largest and most profitable component of the Indian seed sector and stimulated more private R&D investment in cotton improvement.
Public research in India provided a further (complementary) stimulus to private agricultural R&D:
Government-supported research programs played an important role in the early stages of all input industry research programs.
The research institutes of the Indian Council of Agricultural Research and the State Agricultural Universities, along with the International Rice Research Institute, the International Maize and Wheat Improvement Center, and the International Crops Research Institute for the Semi-Arid Tropics, provided the parental breeding lines that private seed companies turned into hybrid cotton, sorghum, pearl millet, maize, and rice varieties.
The Central Mechanical Engineering Research Institute (also part of CSIR) designed the Swaraj tractor in 1974. It was the first all-indigenous tractor design. Punjab Tractors, a government subsidiary promoted by Punjab State Industrial Development Corporation, sold more than 50,000 Swaraj tractors and was eventually privatized.
The National Chemical Laboratory in Pune, which is part of the Council for Scientific and Industrial Research (CSIR), helped Indian pesticide companies develop efficient methods for pesticide manufacture and formulation.
Positive impact on private agricultural research is IPR: patents, regulations, and technical means of protecting innovators from having their technology copied without their permission.
The clearest evidence of the importance of patents is the 2005 amendments to the Indian patent law. These amendments permitted product patents for agricultural chemicals, biotechnology innovations, and veterinary drugs (and human drugs) for the first time since 1972.
Change of Market structure (Agriculture Input Industries)
To solidify market access to farmers as well as complementary technologies, industrial firms acquired or merged with agricultural input suppliers and other technology providers.
Although other factors contributed to the changing structure of input supply industries, the net effect of these forces has been increasing concentration in global agricultural input markets.
Allowing greater private sector participation in agricultural input industries has reduced concentration and increased competition in these markets.
The most rapid growth in concentration took place in the seed and biotechnology industry, in which the eight-firm market share rose from 29% in 1994 to 54% in 2009.
The crop seed industry, R&D intensity increased from 7.5% in 1994 to more than 11% after 2000.
Positive rate effect of international technology transfers large firms in the seed and biotechnology, agricultural chemical, animal health, animal breeding, and farm machinery industries maintain R&D facilities around the world. These global research networks allow such firms to develop and adapt new technologies to local conditions, to meet national regulatory requirements, and to achieve cost economies in their R&D activities.
As foreign and large domestic private companies were allowed to produce and sell seed to farmers, state-owned enterprises declined, and the market share of private companies grew, from 64% of sales in 1991 to 80% in 2009.
Growth of seed sales by privately owned seed companies was led by small- and medium-sized (SME) Indian firms such as Mahyco, Nuziveedu Seeds, and Rasi Seeds, as well as new SME entrants such as Vibha Seeds.
The second-largest contributors to growth of private seed sales were the MNCs. In 1987, approximately 10% of seed sales were by joint ventures in which MNCs were minority shareholders.
A third reason for the growth of seed sales can be attributed to the entrance of large Indian companies into the seed business. These companies acquired both domestic and foreign seed companies to gain market share in the Indian seed market.
IMPACT OF PRIVATE AGRICULTURAL R&D in AGRICULTURAL PRODUCTIVITY:
Farm machinery, agricultural fertilizers and chemicals, veterinary pharmaceuticals, and other industrial manufactures have substituted for farm-supplied land and labor inputs and have relaxed resource constraints to agricultural growth.
The supply of industrial inputs to agriculture has been an important source of agricultural productivity growth at least since the middle of the twentieth century.
Private agricultural R&D lowered the cost and improved the quality of these industrial inputs.
The emergence of the biotechnology industry toward the end of the twentieth century provided a new means through which industry helped raise agricultural productivity.
Increased use of industry-supplied inputs in agriculture substitutes for farm-supplied land and labor inputs and raises overall agricultural output. However, the extent to which industrial inputs raise agricultural total factor productivity (TFP) depends on the prices that farmers pay for these inputs.
The estimated changes in total factor productivity (TFP) in crop production for each district in 13 states of India and then regressed TFP against public and private agricultural R&D capital and other variables.
It measures the private agricultural R&D stock that included both local and imported mechanical and chemical technology. They found that, although public agricultural research and extension were the principal drivers of agricultural TFP growth in India, private agricultural R&D accounted for a significant share (11%) of TFP improvement.
The impact of private agricultural R&D on specific technologies, especially hybrid seed, hybrid poultry, and GM crops.
It is founded that hybrid maize technology was often transferred directly among temperate countries through seed trade, whereas private sector adaptive research was required to adapt hybrids from temperate to tropical regions.
Privately developed hybrid maize, sorghum, and pearl millet in India, found a significant and positive impact on crop yield and farm income.
Yield gains from GM crop adoption were relatively greater in developing countries, and both small and large farms benefited from GM crop adoption. To know more about GMO crops.
The supply effects of GM crop adoption reduced global prices of these commodities, transferring a significant share of the economic benefits to consumers.
Farmers producing IR cotton in India received higher shares of income. Adoption of IR traits involved both significant yield gains and cost reductions (especially reduction of chemical pesticide applications)
In future of support:
The growth in private agricultural R&D has been driven by the rising global demand for agricultural commodities, by the liberalization of agricultural input markets, by government policies toward IPR and regulation, and finally and perhaps most importantly by scientific advances such as biotechnology and information technology that have created new technological opportunities for commercialization.
Scientific advances are based in large part on prior government-supported and university research. An important area for future inquiry is to what extent recent scientific and technological advances in synthetic biology and uses of big data may further stimulate agricultural R&D by the business sector.
What is an Insect resistance (IR)?
The development of an ability in strain of insects to tolerate doses of toxicants which would prove lethal to majority of individual in normal population of the same species.
what is TFP?
How many Private agricultural companies are present in India?
Which state has highest number of private based companies?
How are R&D and technology revolutionizing the agricultural industry?
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