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Needle in a haystack: Patents that inspire agricultural innovation
Patent documents are underexploited resources—not only for understanding the evolution of agricultural technology but also for assisting governments, companies, and academic institutions in the inventive process. 1 1. Leonidas Aristodemou and Frank Tietze, “Citations as a measure of technological impact: A review of forward citation-based measures,” World Patent Information, June 2018, Volume 53, pp. 39–44. More than 40,000 patents related to agricultural inputs have been granted in the past ten years. We find that a rigorous patent-review process could aid agricultural-input companies in their pursuit of innovation.Agricultural innovation is increasingly important given the need to feed a growing global population—ten billion people by 2050, two billion more than today. 2 2. Craig Hanson et al., Creating a sustainable food future: A menu of solutions to feed nearly 10 billion people by 2050, World Resources Institute, July 2019, wri.org. Worldwide, agricultural production will face challenges, such as skyrocketing demand for crop calories 3 3. The future of food and agriculture—Alternative pathways to 2050, Food and Agriculture Organization of the United Nations, 2018, fao.org. and constraints on crop yields. 4 4. Elizabeth Ainsworth et al., “Genetic strategies for improving crop yields,” Nature, November 2019, Volume 575, pp. 109–18; “Science breakthroughs to advance food and agricultural research by 2030,” National Academies of Sciences, Engineering, and Medicine, Washington, DC: The National Academies Press, 2019, nap.edu. In addition to addressing global challenges, enhanced patenting may also lead to better corporate financial performance. Research has shown a positive correlation between granted patents and financial performance. 5 5. Kendall W. Artz et al., “A longitudinal study of the impact of R&D, patents, and product innovation on firm performance,” Journal of Product Innovation Management Volume 27, Number 5, pp. 725–40; Knut Blind et al., Patents and the financial performance of firms—An analysis based on stock market data, Fraunhofer Institute for Systems and Innovation Research ISI discussion paper, Innovation Systems and Policy Analysis series, Number 28, February 2011, isi.fraunhofer.de. We find similar indications within the agricultural-input sector, with high-patenting firms leading their low-patenting counterparts in three-year average earnings before interest, taxes, depreciation, and amortization (EBITDA) margins by two percentage points. 6 6. Based on historical three-year EBITDA margins of the top and bottom ten corporations in the top 100 patenting entities. Most agricultural innovation has been geographically concentrated. In 2019, for instance, five regions accounted for 77 percent of the granted patents worldwide: China (45 percent), the United States (11 percent), European Patent Organization member states, Russia, and South Korea (7 percent each). While the United States holds the top spot in the relevance of innovation, China is expected to continue its dominance in the raw quantity of patents published. Moreover, 88 percent of agricultural-input patenting in the United States was associated with corporations, both foreign and domestic (Exhibit 1)....
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