New research from the University of Nebraska–Lincoln shows that agricultural biotechnology companies can do well by doing good.
Agricultural economists Konstantinos Giannakas and Amalia Yiannaka found that companies can profit by lowering the price of genetic-modification technology in hunger-stricken areas when consumers associate this technology with reducing malnutrition and hunger.
“When a company develops a new innovation, such as a new seed trait, a common assumption is that the company should exercise market power in order to maximize profits,” said Giannakas, Harold W. Eberhard Distinguished Professor of Agricultural Economics. “However, our research shows that the company can actually profit by giving away its technology to hunger-stricken areas.”
The Food and Agriculture Organization estimates that more than 820 million people around the world face malnutrition and hunger. Agricultural biotechnology has the potential to address food-insecurity challenges by enhancing both the resistance of plants to environmental stresses, such as drought, and the quality and nutritional value of food.
The research shows that when the association of genetic-modification technology with reduced malnutrition and hunger in food-insecure areas lessens consumer aversion to such technology, innovative companies will find it optimal to reduce their prices and increase consumer access to nutritious food in these areas. The reason is that their losses in these areas are more than compensated by their gains in the rest of the world.
“For these benefits to be maximized, it is important that the impact of genetic-modification technology in hunger-stricken areas of the world is significant and is broadly and effectively communicated,” Giannakas said.
The results of the study were recently published in Agricultural Economics, the journal of the International Association of Agricultural Economists.