000293186 001__ 293186
000293186 005__ 20210122082431.0
000293186 0247_ $$2doi$$a10.22004/ag.econ.293186
000293186 037__ $$a1187-2019-3608
000293186 041__ $$aeng
000293186 245__ $$aGenetic Editing (GE) Versus Genetic Modification (GM) in the Research and Development of New Crop Varieties: An Economic Comparison
000293186 260__ $$c2019-09-27
000293186 269__ $$a2019-09-27
000293186 300__ $$a41
000293186 336__ $$aReport
000293186 490__ $$aAgribusiness and Applied Economics Report No. 793
000293186 520__ $$aGenetic editing (GE) offers an additional tool to traditional crop breeding and genetic modification (GM) for developing new traits in agricultural crops. Surveys of leading crop technology companies and a review of the literature indicate that GE may offer considerable economies of scale when compared to GM crop development. These economies are generally attributed to lower R&D costs, higher probability of R&D success (particularly in the initial discovery phase), and the fact that GE crops do not require an extra regulatory approval step (at least in most countries outside the EU) that adds considerable cost and uncertainty to the GM development process. This study examines the economics of GE versus GM crop development from the perspective of the minimum required market size (in terms of potential crop area) of a potential crop in order for the technology firm to expect to break even in terms of the real option value (ROV) of the project. The valuation model is unique in that it combines a decision tree with a binomial lattice in the valuation of an abandonment real option on the new crop technology. The decision tree is used to model the R&D process (which is non-market driven) while the binomial lattice is used to value the market-driven commercialization of the candidate crop variety. A survey of industry experts provided a range of values with regards to the time and cost of each R&D phase for both GE and GM crop development, so stochastic simulation was incorporated into the ROV model. A primary result from the empirical model is that across a wide range of trait values, the required cropping area for breaking even on a GE crop variety was consistently 96.3% less than the area required for a GM crop with the identical trait value and commercialization profile. Sensitivity analysis indicated that the GM (and GE to a lesser extent) required area was highly sensitive to the probability of success in the discovery phase. Somewhat surprising, the results for GM and GE were not sensitive to the abandonment option parameters – an indication that this type of real option adds little value to projects primarily due to the low volatility of returns during the commercialization phase.
000293186 546__ $$aEnglish
000293186 650__ $$aCrop Production/Industries
000293186 650__ $$aResearch and Development/Tech Change/Emerging Technologies
000293186 700__ $$aBullock, David W.
000293186 700__ $$aWilson, William W.
000293186 700__ $$aNeadeau, Joseph F.
000293186 8560_ $$fedie.nelson@ndsu.edu
000293186 8564_ $$96e14f4b7-71de-42cc-9f68-7e1a044e1513$$s1009007$$uhttps://ageconsearch.umn.edu/record/293186/files/AAE793.pdf
000293186 909CO $$ooai:ageconsearch.umn.edu:293186$$pGLOBAL_SET
000293186 913__ $$aBy depositing this Content ('Content') in AgEcon Search, I agree that  I am solely responsible for any consequences of uploading this Content to AgEcon Search and making it publicly available, and I represent and warrant that: I am either the sole creator and the owner of the copyrights and all other rights in the Content; or, without obtaining another’s permission, I have the right to deposit the Content in an archive such as AgEcon Search. To the extent that any portions of the Content are not my own creation, they are used with the copyright holder’s express permission or as permitted by law. Additionally, the Content does not infringe the copyrights or other intellectual property rights of another, nor does the Content violate any laws or another’s rights of privacy or publicity. The Content contains no restricted, private, confidential, or otherwise protected data or information that should not be publicly shared. I understand that AgEcon Search will do its best to provide perpetual access to my Content. In order to support these efforts, I grant the Regents of the University of Minnesota ('University'), through AgEcon Search, the following non-exclusive, irrevocable, royalty-free, world-wide rights and licenses: to access, reproduce, distribute and publicly display the Content, in whole or in part, in order to secure, preserve and make it publicly available, and to make derivative works based upon the Content in order to migrate the Content to other media or formats, or to preserve its public access. These terms do not transfer ownership of the copyright(s) in the Content. These terms only grant to the University the limited license outlined above.
000293186 980__ $$a1187