Working paper abstract

#2014-054

Globalization, the rise of biotechnology and catching up in agricultural innovation: The case of Bt technology in India

Michiko Iizuka & Ajay Thutupalli

The agricultural sector has played an important role in the provision of food, foreign exchange and sustainable energy to many developing countries. This sector, however, has not been considered as a driving force of innovation as compared to other productive sectors. However, recent economics and international business literature suggests that the agricultural sector (1) has become knowledge intensive with the rise of biotechnology (Bt); and (2) is a sector where firms in developing countries can play an important role in production and innovation due to their latent advantage in the context-specific or in-situ knowledge base. In this paper, we first present a conceptual framework that characterizes the knowledge required for successful agricultural innovation against the backdrop of globalization and rise of biotechnology. We then examine the case of diffusion of Bt cotton hybrids (Bacillus thuringiensis, an insect resistant seed technology) in India to illustrate the dynamics of knowledge creation and catching up by the local seed firms based on their interactions with global as well as other local firms. Our analysis reveals that the local firms with absorptive capacity, that is, the ability to effectively integrate location-specific (in-situ knowledge) and generic scientific knowledge (global knowledge) can catch up with global frontier technologies to gain significant domestic market shares.

Keywords: Globalization, Catching up, GMOs, Agricultural Biotechnology, Bt cotton India

JEL classification: O13, O31, O32, Q16