globalization, the rise of biotechnology and catching -up
TRANSCRIPT
Globalization, the rise of biotechnology and catching-up in Agricultural innovation: the case of Bt (Bacillus thuringiensis)
technology in India
Michiko Iizuka*, Ajay Thutupalli+
25 years of UNU-MERIT conference
26-11-2014
*Research Fellow, UNU-MERIT, 19 Keizer Karelplein, 6211TC, Maastricht, The Netherlands; [email protected] +31(0) 43 3884481
+ PhD Fellow, UNU-MERIT, 19 Keizer Karelplein, 6211TC, Maastricht, The Netherlands;
[email protected] +31 (0) 62 783 9116
UNU-MERIT 1
Introduction • Innovation in the agricultural sector – seeds - is often associated to ‘durable
goods monopoly’ - R&D is subject to market failure • Considered as primarily ‘supplier-driven’ (Pavitt,1984) and ‘low-tech’ • Reflected in the innovation literature that mainly concentrates on industrial
sectors. However, • The following changes took place
– Globalization of knowledge production – Rise of biotechnology – Rise of the private sector (MNEs and local firms)
What are the implications of these changes for emerging countries?
UNU-MERIT 2
Questions
In the context of globalization of knowledge production and rise of new technology paradigm - biotechnology:
1. What are the changes that are brought about in the knowledge base for
agricultural innovation?
2. How is the catching-up process of emerging countries evolving under such knowledge creation dynamics?
UNU-MERIT 3
Methodology
Literature • Changes in knowledge production with globalization - the role of local
actors in emerging countries • Sectoral specificity of agriculture and innovation process. • Changes in the innovation process before and after the rise of
biotechnology.
Conceptual framework • Develop a conceptual framework that characterizes the knowledge base for
agricultural innovation under the context of globalization and rise of biotechnology.
Case study analysis • Analyze the case of India’s Bt cotton to understand the role of the
knowledge base in the catching-up. • Analyze the strategies for ‘catching-up’ what worked?
UNU-MERIT 4
Knowledge creation - a dynamic and global process
• Understanding has evolved – ‘simple’ reduced information which can be freely accessed (Arrow, 1962) to the that it is complex and iterative process at the firm level (Nonaka and Takeuchi, 1995).
• Collective, interactive process and happens in clusters (Maskell and
Malmberg,1999)
• Interactions between firms at the regional and national levels promoting knowledge creation in industrial networks (Hakansson, 1982; Storper,1993 )
• Economics of innovation viewpoint (Lundvall, 1992; Nelson, 1993) – Absorption of knowledge as highly heterogeneous and dependent on the
national and regional systems of innovation. – The evolution of a localized knowledge base by means of ‘embodied expertise’
or ‘know-how’ in the form of human resources such as researchers, managers and skilled workers .
The national systems are now increasingly required to be integrated into the global knowledge system. 5
Globalization and knowledge creation
UNU-MERIT 6
Before globalization After globalization
Knowledge is simple accumulation of information and is a pure public good; it is not possible to exclude anyone from using it.
Knowledge is not a pure public good, and access to knowledge is variable.
Incentives for knowledge creation are not linked to its ownership (appropriability).
Incentives for knowledge creation are increasingly linked to its ownership.
Production of knowledge is often solitary. Production of knowledge is not solitary; it happens in global production networks.
The producer of knowledge directly interacts with the market.
The producer of knowledge faces a specific structure of interaction among economic agents.
Agents have full capacity to understand existing knowledge.
There are differences in utilization of existing knowledge, depending upon absorptive capacities.
Changes in the notion of knowledge and the knowledge creation process with globalization . Adapted from Iizuka (2007), Amin and Cohendet (2004)
Changing role of local firms in the global production
processes
• Global Value Chains viewpoint – MNCs and subsidiaries - less hierarchical and domestic partners are at arms’ length
distance in the value chain (Gerrefi and Kaplinsky 2001; Kaplinsky, 2001) – Technological upgrading opportunities of developing country firms via participating
in GVCs
• Global Production Networks literature – Less hierarchical and equal positioning of the subsidiaries in knowledge sourcing
(Ernst, 2000; Birkinshaw and Hood, 1998; Cantwell and Iammarino, 2003)
• FDI/Trade literature – Role of absorptive capacity and indigenous technological efforts of local firms is
contributing to knowledge production (Cohen and Levinthal,1990; Fu et al, 2011) – R&D collaboration with emerging country firms becoming necessary (entry into new
markets, to avoid weak IPR in emerging countries ; Zhao, 2006) Role of subsidiaries and local firms in global production process is gaining
importance.
7
Catching-up
• Catching-up = closing of the gap in technological capabilities between leaders and followers (Abramovitz, 1986)
• Leap frogging and patterns of catch-up– (Perez and Soete, 1988; Lim and Lee, 2001) • Outcomes of technological catching up can be increased productivity - > domestic or
export market shares.
• The actors, the knowledge base and the underlying institutions (such as patent system and government policies) all influence the dynamics of catching up (Malerba and Nelson, 2011).
• Lim and Lee (2001) patterns of catching-up
– Path following – Stage Skipping – Path creating
• Prahalad and Mashelkar ‘s (2010) ideas
– Absorptive Vs Applicative capacity – Combining off-the-shelf technologies and applying in a new context – Re-engineering and or integration to create of new products (TCS, Wipro etc)
8
Agricultural Innovation and Globalization
Changes that took place in the sector • Rise of biotechnology • Increase presence of institutions for intellectual property rights (IPR)- • Patent protection for biological materials (genes), tools and processes,
UPOV (plant varieties) • Entry of large private sector firms such as Monsanto, Du pont and
Syngenta into the global agricultural markets (agrochemicals and seeds) and their entry into emerging country markets - liberalization
• Strong appropriability regime exists • Upstream scientific knowledge is transferable to some degree via the
transfer of genes/gene constructs/methods of transfer. • Segmentation in the production of innovations - technology (genes) and
seeds (plant varieties)
UNU-MERIT 9
Rank Firm % of Global seed market share
1 Monsanto (USA) 26.0 2 DuPont Pioneer (USA) 18.2 3 Syngenta (Switzerland) 9.2 4 Vilmorin (Groupe Limagrain) (France) 4.8 5 WinField (Land O Lakes) (USA) 3.9 6 KWS (Germany) 3.6 7 Bayer Crop science (Germany) 3.3 8 Dow Agro Sciences (USA) 3.1 9 Sakata (Japan) 1.6 10 Takii & Company (Japan) 1.6
UNU-MERIT 10
Top firms in the global seed market in 2011. Adapted from ETC-Group (2013); Bonny (2014)
The rise of the private sector
Location specificity and the role of biological innovations
• Productivity problem in agriculture (unlike the manufacturing sector) is multi-faceted and requires a range of complementary technological solutions.
• Beyond the standard factors of production (land, labour and capital)- the role of agro-ecological factors
• Location specificity of agro-ecology • Dynamism of changing agro-ecology • The role of accumulated local knowledge on biological innovations and
agro-ecology giving a latent advantage to local actors– Knowledge based capital
UNU-MERIT 11
Technology Paradigms in Agriculture
UNU-MERIT 12
Solution model
Selected Techniques
Principle areas of Scientific enquiry
Conventional or Hybrid seed + complementary
inputs
Plant breeding - phenotypic
Genetic Engineered seed + complementary inputs
Plant Breeding - Genotypic
Molecular biology, Genetics, Informatics +
Plant Sciences Plant Sciences
HYVs /Hybrids + synthetic fertilizers + pesticides + Practices
Genetically Modified Seed + fertilizers +
Practices Solution package
Conventional Biotech
Yields Yields Problem
Knowledge base •Global and local components
1. Upstream (global in nature)
Low-end scientific – Conventional breeding/Hybridization High-end scientific – Biotech aided breeding/GM
2. Downstream (in-situ) Markets, culture, farmer preferences Agro-ecology
• Complementarity leading to possibility of vertical linkages between actors
Seeds in India
• Seed sector - 6th largest after US, China, France, Canada and Brazil • Innovation - Lead by huge network of ICAR institutions and agricultural
universities. Private sector is the follower.
• However.... after the seeds bill in 1988 - private sector R&D investment in crop improvement has grown steadily from INR 417 million in 1987 to INR 6000 million in 2009 (Pray et al, 2001; Knowledge Report, ISC, 2003).
• Competition in hybrid seed markets: Unlike the global seed industry, the
Indian seed industry is not consolidated with a number of local firms and MNEs competing in the hybrid markets of cotton, corn and vegetables (Milind et al, 2006)
Entry and catching-up of private seed firms started in late 80’s and the
hybrid seed markets are dominated by private firms
UNU-MERIT 14
Motivation
UNU-MERIT 15
0 50
100 150 200 250 300 350 400 450 500
1950
-51
1954
-55
1958
-59
1962
-63
1966
-67
1970
-71
1974
-75
1978
-79
1982
-83
1986
-87
1990
-91
1994
-95
1998
-99
2002
-03
2006
-07
Kg/H
ecta
re
Yield
0
5000
10000
15000
20000
25000
30000
1960
19
64
1968
19
72
1976
19
80
1984
19
88
1992
19
96
2000
20
04
2008
20
12
Thou
sand
s of B
ales
Domestic Consumption
Production
0 2000 4000 6000 8000
10000 12000
1960
19
63
1966
19
69
1972
19
75
1978
19
81
1984
19
87
1990
19
93
1996
19
99
2002
20
05
2008
20
11
Thousands of bales
import Export
Source :USDA, PS&D Database & ABLE Biotech Surveys
By late 90’s cotton yield losses were 40-50% due to bollworms - Productivity jump and other changes after the advent of Bt technology
The transition • Major transition to Biotech paradigm only with the introduction of Bt
cotton by Monsanto through its subsidiary Mahyco in 2002. • 64 agribiotech firms dealing with biotech/GM seeds. • More than 50 GM crop projects in the pipeline. • Cotton is the only GM crop approved for cultivation.
UNU-MERIT 16
0
500
1000
1500
2000
2500
3000
3500
Sale
s rev
enue
in IN
R 1
0 m
illio
n Total Revenue
Domestic Revenue
Export Revenue
Source: ABLE, Biospectrum Surveys
Development of Bt hybrids Steps involved the development of Bt hybrids 1. The isolation of the gene of interest (Bt is the source) 2. The gene of interest is then transferred into the native DNA of a vector (usually a
soil bacterium called Agro-bacterium Tumefaciens). 3. The plant cells which took up the gene of interest are carefully selected for
regeneration of the whole plant * Event 4. The desired plant is then crossed with a local cultivar which has proven superior
agronomic performance * Back-crossing. 5. Agronomic testing, environmental and bio safety tests are further carried out in the
field settings for obtaining commercial approval from the regulatory agency.
* Stage skipping is possible via licensing of genes/events and Back crossing
Isolation of Gene Gene Transfer Regeneration and Verification Adaptation * Filed trials
Catching up with Bt • Strategy space for catching-up
• Upstream 1. Develop via collaboration with domestic and global players 2. Licensing 3. Develop in-house
• In-situ 1. Access via aquisition of firms or hybrid lines 2. Develop in-house
UNU-MERIT 18
High-end Scientific Local Agro ecology
Local Market, Cultural Low-end Scientific )
Global In situ
Innovation
Upstream Downstream
Technology Vs Seed Markets in cotton
• Event markets: 6 approved events (2012 May, GEAC) • Hybrid seed market: Approximately 1128 hybrids (2012 May, GEAC)
• MNC subsidiary Monsanto-Mahyco dominating the technology markets
where as local seed firms (Nuziveedu, Raasi) doing well in the seed markets
• Local firms dominating the seed market have back crossed the licensed (sub-licensed) events into their commercially successful hybrid lines.
• There are few firms apart from Monsanto with own events developed either in-house or in collaboration with local and global players
UNU-MERIT 19
Technology Market
Year Firm; Event Type of firm Strategy for developing Bt technology
Strategy
2002 Monsanto Cry1Ac; MON 531 Multinational In-house R&D None
2006 JK Agri Genetics indigenously developed Cry1Ac; Event I
Local Alliance with IIT, Kharaghpur
Collaboration with local private and public sector players
2006 Nath Seeds Cry1Ac+Cry1Ab; GFM Local Licensing from Chinese Academy of Sciences
Indigenous development from licensed technology
2006 Monsanto Cry1Ac+Cry2Ab; MON 15985
Multinational In-house R&D None
2008 UAS Dharwad & CICS Event Truncated Cry1Ac
Public sector In-house R&D Collaboration between public sector institutions
2009 Metahelix 9124 Cry1C Local In-house R&D None
UNU-MERIT 20
Diverse strategies
Commercially approved Bt events in India as of May 2012. Authors’ compilation from GEAC (2013)
Technology Market
UNU-MERIT 21
Mahyco-Monsanto biotech dominate the Technology Market
Bt cotton hybrids market
UNU-MERIT 22
Local firms dominate the Bt hybrids market- Nuziveedu, Raasi, Ankur seeds and Mahyco in the top biotech seed market
Revenues in US$ million (INR 60.5= US$ 1)
Ranking Firm 2011–12 2010–11 2009–10 1 Nuziveedu Seeds 123.18 100.86 78.85 2 Rasi Seeds 64.81 61.49 59.32 3 Ankur Seeds 53.74 41.34 18.11 4 Mahyco 51.92 59.36 51.59 5 Krishidhan Seeds 28.74 45.66 22.03 6 Nath Seeds 14.88 4.55 3.65 7 JK Agri Genetics 8.38 5.32 5.37 8 Mavens Biotech 7.53 9.28 7.86 9 Excel Industries 1.81 2.01 1.36 10 Metahelix 0.77 0.11 0.99
Top Agri-biotech firms operating in India. ABLE-Biospectrum Biotech Industry survey, 2012 *These rankings to a large extent reflect firms’ market performance in Bt cotton hybrids
UNU-MERIT 23
Rank Firm Strategy for developing Bt cotton hybrids
Revenues in 2012–13 (INR million)
1 Nuziveedu Seeds Sub-licensing and in-house back crossing; M&As
7781.3
2 Ankur Seeds Sub-licensing and in-house back crossing. 3410.0
3 Mahyco Licensing and in-house back crossing; Alliance with MNE.
2460.0
4 Rasi Seeds Sub-licensing and in-house back crossing. 2290.0
5 Krishidhan Seeds Sub-licensing and in-house back crossing. 1998.1
Bt cotton hybrids market
Dominant and successful strategy was to license the technology
Catching-up Strategies in Bt cotton
Conclusions • Capabilities story - conventional hybrids -> biotech hybrids
• Firms with the right capabilities were able to upgrade and quiclly capture
large domestic market shares.
• Latent comparative advantage in in-situ knowledge provided ‘window of opportunity’ to catch-up and dominate the seed markets
• Few firms also offered competition to Monsanto in the technology markets via collaboration.
• Nature of technology, the crop, Market size, competition, faster diffusion all
played a role.
UNU-MERIT 25
Qualitative interviews and focus group discussions
UNU-MERIT 26
1. Status of Bt cotton R&D in India – Agribiotech foundation and ANGR Agricultural University 2. Status of marker assisted breeding in India 3. Agribiotech awareness and prospects in India – Warangal, Jagityala, Nellore, Adilabad 4. Seed village Programme- Kurnool
No. Name Position Organization 1 Dr. Lakshmi Tummuru Agricultural scientist Centre for Sustainable Agriculture, Hyd 2 Dr. Satya Prasad Makula Chief Scientist Plant Biotechnology JK Agrigenetics/Nuziveedu 3 Dr P Ananda Kumar Director, Professor in Plant Physiology Institute of Biotechnology, Acharya N G Ranga Agricultural University 4 Dr. N Chandrasekhar Rao Economist CESS, Hyd; IEG, New Delhi 5 Dr. P. Prudhvikar Reddy Economist CESS, Hyd 6 Dr. G.Pakki Reddy Economist Agribiotech foundation 7 Dr. Bharath Ramaswami Economist Indian Statistical Institute, New Delhi 8 Dr. Aldas Janaiah Economist The National Institute for Agricultural Economics and Policy Research (NIAP) 9 Dr. G V Ramanjaneyulu Former Agricultural Scientist - Head of the NGO- CSA Centre for Sustainable Agriculture, Hyd
10 Mr. Jacob PhD scholar in Ethics in Science and Technology University of Hyderabad 11 Vijaya Naresh Juturu Phd Scholar in plant biotechnology Agribiotech foundation 12 KL Prasanna Kumar PhD scholar Technology Management Agribiotech foundation 13 Dr. R. Sudhakar Principal Scientist - Plant Pathology Seed research and technology centre, ANGRAU, Hyd 14 Mr. N Sunil Kumar Regional Manager - Marketing and Sales Syngenta/Nuziveedu seeds/Krishidhan seeds 15 D. Srinivas Research assistant - Biotechnology Agribiotech foundation 16 Dr.Ratnakar Vallabhaneni Scientist - Plant Biotechnology Nuziveedu seeds 17 Dr. Chenna Reddy Principal Scientist in cotton breeding ARS, LAM, Guntur 18 Dr. Hari Babu Yadla Scientist in Plant Genetics Agribiotech foundation/RARS Warangal 19 Dr.Rajasekhar Scientist- Plant Pathology (Rice) Agricultural Research Station, Nellore 20 Mr.Vamsi Seeds and Pesticides Retailer Vamsi Agrochemicals, seeds and pesticides, Warangal 21 Mr Raghunatha Rao Senior seed breeder - specialist in cotton Nuziveedu seeds 22 Mr. Reddy Senior Seeds distributor in Andhra Pradesh Hyderabad 23 G Ramakotaya Subject Matter Specialist (Agronomy / Seed Technology) Agribiotech foundation 24 Dr. P. Sriramulu Subject Matter Specialist [Animal Husbandry] Agribiotech foundation 25 Dr J S Bentur Subject Matter Specialist [Entomology] Agribiotech foundation 26 P Chengal Reddy President Federation of Farmers Association Federation of Farmers Association, Hyd 27 ADA- Nellore Assistant Director dept. of Agriculture - Administrator Department of Agriculture, Nellore