Innovation, competition, and productivity growth:

Evidence on the impact of growth in Asia’s maize seed sector

David J. Spielman and Adam Kennedy

International Food Policy Research Institute

Motivation: A serious measurement problem

• Policies designed to promote seed industry growth require data and information

• Innovation policies require data on firm-level R&D spending, product pipelines

• Competition policies require data on market structure and firm behavior

• But the requisite data and information are difficult to obtain• Firms do not share proprietary data on revenues, R&D spending, product pipelines

• Governments may not monitor firm-level activity in a regular manner

• Even with data, the link btwn innovation and competition isn’t easily measured• How does competition encourage/discourage innovation? (Schumpeter 1934)

• How are the gains from innovation distributed in society?

• How do private firms behave in complex markets?

Aims and objectives

• Define a minimal set of measurements required to gauge industry growth, innovation, and competition

• Apply these measurements to available data from the maize seed industries in Nepal and selected Asian countries

Asia’s maize seed industry: Stylized facts and figures

• 2006 estimates of the global maize market (Fuglie et al. 2011)

• Maize seeds and traits = ~$5 billion

• Private R&D spending on maize seeds and traits = ~$0.5 – $1 billion

• Among the “big 6” firms, only two do not invest in maize R&D√ Monsanto, DuPont/Pioneer, Syngenta, Dow,

X Bayer, BASF

• Prior studies have documented maize innovation and product markets• Evidence of increasing market concentration around seeds & traits markets

• No clear relationship between increasing concentration and R&D activity

• No clear evidence of non-competitive behavior in product markets

How useful are aggregate demand & supply figures?

6 7 4

90

93 964

10

90

0

10

20

30

40

50

60

70

80

90

100

Bangladesh Pakistan Thailand Vietnam

Per

cen

t

Estimated seed demand and supply of maize seed, by source

Public Private Informal Combined (public + private)

How useful are seed replacement rate figures?

0

10

20

30

40

50

60

70

80

90

100

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Per

cen

t

Seed replacement rates, India, 2001-2011

Bihar OPV Andhra Pradesh Hybrid Punjab OPV Uttar Pradesh OPV

A minimum dataset required for useful analysis

• Industry performance

• Industry structure

• Innovation

• Regulation

• Consumer protection

• Intellectual property rights

• Biosafety regulations

• Imports

Rate of innovation ≈ varietal release rate

198

82

16

98

0 0 2

118

0

20

40

60

80

100

120

140

Bangladesh, Maize(all), 1994-2011

Indonesia, Maize(composite), 2006-

2012

Indonesia, Maize(hybrid), 2006-

2012

Pakistan, Maize(all), 1990-2013

Vietnam, Maize(all), 1977-2012

No. o

f re

leas

es

Country, maize type, years

Maize releases for selected crops, years and countries

Public Private Combined (public + private)

Sources: Authors, based on data from Bangladesh by Naher and Spielman (2014); Indonesia: Jamal (2014); Pakistan: Rana (2014); Vietnam: Mau Dung (2014).

Rate of innovation ≈ varietal aging

21 20 2019

0

5

10

15

20

Marginal Small Medium Large

Years

Landholding size

Average age of top 5 rice varieties under cultivation, by farmers’ landholding size, Bangladesh

Source: Naher and Spielman (2014) based on data from Ahmed (2013)

The top 5 varieties in Bangladesh account for 53% of area under rice cultivation

1,294

2,1852,070

0

500

1000

1500

2000

2500

HH

Ind

ex v

alu

e

Paddy Wheat Maize

Competition ≈ seed market concentration

Authors, based on data for Nepal from Sah (2014).

Concentration in Nepal’s seed market, by crop, 2012

1,294

2,1852,070

0

500

1000

1500

2000

2500

HH

Index

val

ue

HH index values (0-10,000)

64

8782

939199

0

10

20

30

40

50

60

70

80

90

100

CR4 CR8P

erce

nt

CR4 & CR8 (%)

Competition ≈ innovation market concentration

0

2000

4000

6000

8000

10000

12000

0

20

40

60

80

100

120

2006 2007 2008 2009 2010

HH

I

CR

4 (

%)

Concentration in India’s innovation market viz. transgenic R&D, based on field trial data, 1997–2008

Four-firm concentration ratio HHI

Innovation incentives ≈ IP protections

114 117

242

59107 123

10

934

252 260

180

85

18 43

0

100

200

300

400

500

600

700

800

900

1000

Cotton Maize Rice Pearl millet Sorghum Wheat Other

No. o

f ap

plic

atio

ns

Applications for plant varietal protection, India, 2007-2014

Public Private

Innovation incentives ≈ IP regime strength

Source: Author, based on data from Ginarte and Park 1997; Park and Wagh 2002; Park 2008

China India

Brazil South Africa

Bangladesh Colombia

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Enforcement of IPRs

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Coverage of IPRs

Data and analysis priorities

• Crop and variety-specific data on releases

• No. of firms participating in the innovation and product markets

• Estimates of firm-level R&D spending

• Estimates of firm-level R&D shares allocated by crop, trait, management

• Material transfer agreements by source, destination

• PVP applications, certifications

• Patent applications, issuances

• GM trials, approvals by crop, trait, event

A few thoughts on Nepal’s emerging seed industry

• Nepal has several underutilized comparative advantages• Altitude and ecology appropriate to quality seed production

• Proximity to a large seed market in India

• R&D spill-ins from India, Bangladesh, Pakistan

• Nepal has several conflicting priorities• Strong regulatory protections for farmers vs. pro-business regulations

• Foreign direct investment vs. imports vs. import substitution

• Crowding out: State-owned enterprises vs. farmer enterprises vs. domestic co’s vs. foreign co’s

• Which way to go? A serious debate

Thank you