The chicken or egg problem revisited: the role of resources and incentives in the integration of biotechnology techniques

Abstract

During the last 15 years, most countries of the developing world have declared investment in biotechnology to be strategic to their national programs of development and yet none of them has attained an industrial competence in the biotechnology sectors comparable to that of the developed nations. Is it simply a question of inadequacy of resources or is there something more to the building of industrial competence in an emerging highly science-based industry? How do developed and developing countries differ in their capacity to exploit a new field like biotechnology? We explore the problem of creating industrial competence in biotechnology in developing countries through a case study of India. We show that underdevelopment is characterised not only by scarcity of resources, but also by inflexibility of public institutions, absence of crucial networks and myopic vision of firms. These features lower both and the degree of responsiveness to incentives for investment in biotechnology. Thus, the technology strategy in developing countries should not only concern itself with finding the optimal allocation of resources for the integration of biotechnology, but should also attempt to maximise the returns to any such investment through improving incentives.