Competition and Innovation: Did Monsantoos Entry Encourage Innovation in GMO Crops?

Abstract

In 1996, the chemical firm Monsanto bought a plant breeder that had developed a new corn hybrid, which could withstand Monsanto’s powerful herbicide Roundup. Due to the pre-existing structure of the US plant-breeding industry, this acquisition and Monsanto’s acquisition of five other corn breeders meant that Monsanto had also entered soy breeding, in addition to corn. As a result, the market structure of the soy industry shifted from a quasi monopoly (by Pioneer Hi-Bred) to a duopoly with a competitive fringe. At the same time, Monsanto’s acquisitions created no significant change in the market structure for other crops, such as wheat or cotton. New data on field trials enable us to investigate the effects of these changes on innovation. These data indicate that Pioneer innovated less in response to Monsanto’s entry. Field trial data also show that the competitive fringe innovated less after Monsanto entered. Data on patent applications, however, indicate that Pioneer and the competitive fringe patented more, after Monsanto entered.