Private R&D Investment in U.S. Agricultural Industry: Market Demand, Technological Opportunity and Appropriability

Abstract

This study uses new, recently available data to undertake an econometric analysis of the determinants of private R&D investment in five U.S. agricultural industries -agricultural chemicals, farm machinery, food products, plant breeding, and veterinary pharmaceuticals - from 1961 to 1995. Four major results come from the analysis. First, econometric results generally suggest that complementary relationships exist between public and private agricultural R&D investment in all industries except farm machinery. Second, the complementarity between public and private R&D was the strongest and most robust in the plant breeding industry. Third, results are consistent with Schmookler's "demand pull" hypothesis as market demand (measured by industry sales) had a strong positive effect on R&D investment in all industries. Fourth, based on a growth decomposition exercise, growth in public R&D was the major factor contributing to private R&D growth in the plant breeding and agricultural chemicals industries between 1961-95. Sales growth was the major contributing factor to private R&D growth in the other three industries.