The social value of biodiversity for R&D

The value of genetic resources for use in research and development (R&D) activities has been the subject of a literature modelling the activity as one where individual firms engage in optimal search. Here we develop a more generalised framework in which genetic resources are used in R&D at the base of an industry that addresses recurring problems of resistance, as in the pharmaceutical or plant breeding industries. The R&D process is one in which firms are engaging in a continuing contest of innovation against a background of both creative destruction (Schumpeterian competition) and adaptive destruction (natural selection and adaptation). This framework demonstrates that the search model is conceptually inadequate because it fails to incorporate the important dynamic characteristics of biological phenomena. We then demonstrate the important differences between firm-based valuation of genetic resources and the social value of genetic resources for use in this contest of innovation. There are six externalities in private patent-based genetic resource valuation, and five of these indicate that private valuations will under-estimate social values.