Carl E. Pray
Rutgers University
Latha Nagarajan
Rutgers University and International Fertilizer Development Center

Biotechnology influenced Indian R&D through three channels: Bt cotton seed sales increased seed companies’ income, providing them with money to invest in R&D and increasing their expectation for future profits from R&D; biosafety regulations increased biotech and seed firms’ ability to capture some of the economic benefits from research by granting them a monopoly on GM traits and providing regulators to police the monopoly; finally, biotechnology improved technological opportunities with new traits and research tools. We tested the importance of these channels using an econometric model of R&D expenditure by the Indian seed industry with a unique set of individual firm data from 1987 to 2009. Our results show that the introduction of Bt cotton greatly increased seed sales and that these sales were the major determinant of R&D. Evidence also suggests that research increased due to technological opportunities created from GM traits and public-sector research.

Key words: R&D investment, India, agribusiness, biotechnology, seed industry.