The Role of Patent Rights in Mergers: Consolidation in Plant Biotechnology

Alan C. Marco, Vassar College
Gordon C. Rausser, U.C. Berkeley

Abstract

Few empirical papers have addressed the impact of the patent system on industry structure. Using firm-level patent data for firms in plant biotechnology, we develop a measure of patent enforceability. Duration models show that patent statistics are a useful predictor of the timing of consolidation and that patent enforceability is an important factor influencing the likelihood of consolidation. Acquisitions in plant biotechnology may be motivated by the enforcement of patent rights when firms have overlapping technologies; some merger activity may be explained by attempts to avoid mutually blocking technology, as exemplified in the case of Roundup Ready corn.