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Abstract

In this paper, peculiarities of the process of development of agricultural biotechnological innovations are considered, in particular the distinction between R&D races for gene discoveries and subsequent competition for developing their marketable applications in the form of genetically modified (GM) crops, the results of which determine the payoffs of discovering a gene. A formal two-stage model is specified and analyzed with regard to how different patent protection regimes and other government policies affect firm's R&D strategies and the welfare realized from an innovation. We find that different policy measures affect the outcomes of the two stages of biotechnological innovation differently, which leaves some ambiguity as to which patent protection regimes might be strictly preferable. However, general direction of policy improvement is identified.

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