Abstract—Public and private
research and development have driven impressive gains in agricultural
productivity. Over the past few decades, advances in the biological
sciences, as well as legislation that strengthened intellectual
property protection for biological inventions, have increased research
investment by the private sector. New institutional arrangements
have fostered public and private collaboration in research, but
it is unclear how industry consolidation and changes in public funding
will affect agricultural research and its effects on productivity.
Introduction
Unprecedented growth in agricultural productivity over
the past century can be attributed largely to investments in agricultural
research and technology development (see AREI
Chapter 3.4). Many developments—including more efficient
agricultural machinery, agricultural chemicals and fertilizers,
genetic improvements in crops, and changes in farm management techniques—have
transformed U.S. agriculture. These developments have contributed
to an abundant and affordable food supply for consumers.
Most early research efforts sought to replace increasingly expensive
resources with less expensive ones. For example, the development
of farm machinery helped offset increasing labor costs. Currently,
demands for safer, healthier, and more convenient foods, natural
resource conservation, environmental protection, and animal welfare
are changing the agricultural research portfolio. These demands
relate directly to agricultural products and to the impacts of production
methods.
Research Demand
Many different forces affect research investment, and these forces
differ for the public and private sectors. Some technology development
is in response to consumer demand. This kind of focused research
is often called "applied." The private sector will respond
to market demands for new agricultural technologies, but markets
may not address all external effects of production. Environmental
regulation, for example, may increase the development of some environmentally
benign technologies and the demand for those technologies.
Research can also be conducted without an immediately marketable
product, usually for two reasons: basic research (to gain fundamental
knowledge) and the provision of public goods. Basic research is conducted
most often in the public sector because the results of the research
lack immediate private payoffs. The results, though, can provide
a scientific foundation for later public and private developments.
Developments in biotechnology have blurred the distinction between
basic and applied research. For example, "theoretical"
fields such as genomics, proteomics, and bioinformatics have been
supported strongly by the private sector.
Public goods represent a market failure because an individual's
use of the good does not diminish its availability to others, and
it is difficult to exclude anyone from using the good. National
defense exemplifies a public good because once security is provided
for one, all receive the same protection. In agriculture, food safety
and ecosystem stewardship have public good characteristics. While
the payoff to society of investing in basic and public good research
is high, the results of such research generally cannot be appropriated,
so the private sector has little market incentive to conduct this
research. That is where government steps in-through funding and
technology transfer activities.
The roles of the public sector and private industry
in agricultural research have undergone significant changes in the
last two decades due to developments in science, policy, and markets.
The public sector was the primary investor in agricultural research
prior to the 1980s, but now the private sector funds the development
of many new agricultural technologies (Fuglie et al., 1996; Huffman
and Evenson, 2006; Klotz et al., 1995; and Pray, 1993) (see fig.
3.2.1).
Public Sector Research and Development
Public agricultural research involves a unique partnership between
the Federal Government (chiefly USDA) and the States. USDA, the
State Agricultural Experiment Stations (SAES), and cooperating institutions
together conducted over $4 billion of research in 2002 (USDA Current
Research Information System). USDA conducts much of its inhouse
research through its research agencies, primarily the Agricultural
Research Service, the Forest Service, and the Economic Research
Service. The largest expenditures on agricultural research in the
public sector are made by SAES and cooperating institutions, which
rely on Federal and State funding, as well as the private sector.
Historically, USDA has used several funding instruments to provide
research money to States. Formula funds are allocated in
block form to States based on rural population and number of farms.
Research administrators have numerous options in how they distribute
formula funds. National Research Initiative (NRI) competitive
grants are allotted by peer review panels. Special grants are
awarded by Congress, whereas other USDA contracts, grants, and
cooperative agreements are awarded at the discretion of USDA
research agencies. (See Fuglie et al., 1996; and National Research
Council, 1996, for descriptions and comparisons of these mechanisms.)
Within the public agricultural research sector, natural resource
and environmental issues are of interest because they have both
local and national dimensions. State research investments might
be focused on local problems, with Federal funds designated for larger
geographic issues. For example, the development of technologies
to improve water quality and increase water-use efficiency can have
critical local benefits (see AREI Chapters 2.1
and 2.2).
However, benefits from improved water quality accrue beyond regional
jurisdictions. Overall, public research on natural resources and
the environment accounted for 21 percent of total public agricultural
funds in 2003, up from 17 percent in 1998 (fig. 3.2.2).
The research categories that we use may not capture all research
that can benefit the environment. Scientists self-classify their
research using USDA's Current Research Information System
(CRIS) and may not consider "natural resource and environmental
research" as the primary objective of their work. For example,
plant breeders may produce resistant varieties that require fewer
agricultural chemicals, which may improve water quality. Still,
they may classify the research under "plants and their systems."
Private Sector Research and Development
Private industry has been playing a more important role in agricultural
research, not only boosting research investments but also expanding
into new areas of research. For more information, see theAgricultural Research
and Productivity Briefing Room. Private industry expenditures
on agricultural research have increased 50 percent in real terms
between 1978 and 1998 1 (fig.
3.2.1). In 1998, 60 percent of private sector agricultural research
expenditures were allocated to biological and chemical technologies,
such as agricultural chemicals, plant breeding, and animal health,
compared with only 19 percent in 1960 (fig. 3.2.3).
Advances in the biological sciences and expanded intellectual property
rights (IPRs) protection for biological innovations have stimulated
private sector efforts in technology development. Basic research
in biology, microbiology, and computing created new technological
opportunities for private agricultural research. For example, gene
transfer technologies enable researchers to tailor crops for specific
uses, such as crops resistant to disease, pests, herbicides, or
harsh environmental conditions; and crops with increased nutrition
or improved food processing traits. [See AREI
Chapter 3.3 for a more complete discussion of biotechnology-derived
agricultural innovations.]
Expanded IPRs for biological inventions and new plant varieties
have allowed innovating firms to capture a greater share of the
benefits from research. The Patent Act of 1790 was established to
"promote the progress of science and useful arts," but
biological inventions were considered products of nature at that
time, and were not thought to be patentable. The extension of IPRs
to new plant varieties and biological inventions, including biotechnologies,
has further stimulated private companies to invest in plant breeding.
The Plant Patent Act of 1930 and the Plant Variety Protection Act
(PVPA) of 1970 established plant breeders' rights for new
plants and plant varieties. In 1980, a Supreme Court decision (Diamond
v. Chakrabarty) established the use of Utility Patents for biological
inventions, specifically microorganisms. Further decisions by the
Patent and Trademark Office broadened the use of Utility Patents
for plants (in ex parte Hibberd in 1985) and animals (in ex parte Allen in 1987). The number of plant patents, Plant Variety Protection
Certificates (PVPCs), and utility patents issued over the last 30
years has risen (fig. 3.2.4). International organizations have attempted
to harmonize intellectual property protection in order to facilitate
trade and technology development.
Public and Private Collaboration in Agricultural Research
and Technology Transfer
Another change affecting technology development in agriculture has
been the growth in collaborations between the public and private
sectors. Before 1980, U.S. patent policy limited collaboration between
public and private researchers, since the Federal Government assumed
ownership of any inventions that resulted from federally funded
research. The Government Patent Policy of 1980 (Bayh-Dole Act) granted
institutions "certainty of title" for inventions resulting
from federally funded research, and allowed Federal laboratories
to issue exclusive licenses for patents of their inventions. The
1980 Stevenson-Wydler Technology Innovation Act mandated that each
Federal research agency develop specific mechanisms for disseminating
government innovations. The 1986 Technology Transfer Act gave government
agencies additional means to foster technology transfer by authorizing
public-private Cooperative Research and Development Agreements (CRADAs).
This mechanism allows USDA to share technologies at various stages
of development, research results, and scientific resources (though
not money) with industry through joint research ventures.
Incentives for technology transfer may be very important, particularly
for innovations that provide public-good benefits. Potential valuable technologies
developed in the public sector are not automatically marketed by
the private sector. USDA and the SAES transfer a variety of innovations
to private firms and directly to farmers, both shielded and unshielded
(i.e., protected by IPRs or not) to ensure the provision of useful
technologies to the agricultural sector (Day-Rubenstein and Fuglie,
2000).
Public entities like USDA can patent inventions meeting the criteria
of the U.S. Patent and Trademark Office, then grant an exclusive/co-exclusive
(most often), limited exclusive, or nonexclusive license to a private
company to use or market the invention. In 2000, licensing revenue
was less than 0.5 percent of USDA's R&D budget. Still,
the licenses offer an incentive to private firms to develop and
deploy the new technologies.
Other forms of cooperative effort between research entities include
research consortia, which bring together several institutions to
undertake joint research. These consortia increase funding support
for strategic research and research that is considered to be long
term and high risk (Fuglie and Schimmelpfennig, 2000). Large-scale
efforts in plant genomics are underway to map, sequence, and analyze
the genomes of several model plant species that are important for
developing new crop varieties with desired traits.
Likely Research Trends
Several developments will influence the research portfolio over
the next decade. Markets are beginning to develop for some public
goods, such as products grown with "environmentally friendly"
agricultural practices. If private firms can profit from providing
products with desired social characteristics, research will accommodate
such trends.
Another development that may affect future R&D investments
is recent consolidation of seed, biotechnology, and agricultural
chemical industries (Fernandez-Cornejo, 2004). There were 381 mergers,
acquisitions, and other strategic alliances in the agricultural
input industry between 1980 and 1998, and 10 firms accounted for
almost half of that activity (King, 2001). Increased market power
resulting from industry concentration and increased appropriability
of technology may enhance incentives for private-sector innovation,
leading to greater agricultural productivity. On the other hand,
too much market power may inhibit technological advancement by creating
barriers to entry for new firms and limiting access to critical
technology and knowledge.
Developments in multiple scientific disciplines have led to several
new fields: bioremediation, nanotechnology, genomics, proteomics,
and bioinformatics. The expanded platform of knowledge will increase
the options for agricultural research, development, and technology
transfer.
Endnote
1Data were not available for
private agricultural research funding beyond 1998 at the time of
this writing.
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