Property Rights and Strategy: Market Structure and Competition in the Brazilian Soybean Seed Industry

Recent studies indicate that strong systems of property rights are not a necessary condition for the operation of the soybean seed market in the Americas (Wright; Pardey, 2006; Endres; Goldsmith, 2007). These studies are based on a dichotomy. The North – represented by the U.S. – is a strong institutional environment in which agrobiotechnology firms adopt an optimal strategy, setting technological rates charged at the time of acquisition of the seed. The South – represented by Argentina – corresponds to a weak institutional environment in which firms adopt a sub-optimal strategy. Nevertheless, the operation of the seed market in Brazil is based on a different, more complex scheme of collecting royalties from seeds. In face of the institutional differences among the U.S., Argentina, and Brazil, the multiplicity of schemes for the collection of royalties from seeds suggests that strategic decisions in this industry are not trivial. This research assumes that agrobiotechnology companies do not face a choice between optimal and sub-optimal strategies. Firms, in fact, have to choose from a constellation of strategies which are influenced by the quality of the institutional control. The study aims to answer the question: How property rights influence firms’ strategic choices in the seed industry?