past. Much of the RD process in these indus- tries has been focused on the screening of the
strategies that are operational in nature, and their development for specific applications in the indus-
trial context.
In certain circumstances biodiversity operates as a sort of alternative to the standard RD
process. It provides a solution concept that is already known to apply to an important problem.
The identification of medicinal plants and their applications gives a good example of this form of
biodiversity input. Other times the information within nature requires substantial analysis and
modification before it is incorporated within a final product. In this case the information from
biodiversity is best considered as a raw informa- tional input into the RD process. That is, it is
only after it is combined with other forms of capital scientists, specialised machinery that the
naturally generated information can be developed into useful applications. An example of this form
of biodiversity input into RD would be the range of crops used in plant agriculture and plant
genetic resources exposed to environmental shifts and changes, thereby revealing which are the most
successful in the current environment.
In summary, the RD process is the essence of industries such as agriculture and pharmaceuticals
because the primary purpose of these industries is now to address the problem of recurring resis-
tance to previously successful products. RD is the process by which the information that will be
useful against these biological phenomena is iden- tified. Biological resources are essential ingredi-
ents of this RD process in that they themselves embody successful strategies within a contested
environment. They have long been used as a sort of alternative RD process, and they also remain
an important form of input to more standard forms of RD processes in the agricultural and
pharmaceutical industries.
4. Informational property rights: intellectual property rights and the incentives to supply RD
There is one very special form of property right regime that is often used when the industry is
focused on the production of useful information through a process of RD. When RD is a
significant part of the production process within an industry, it is not always possible to obtain a
reasonable rate of return on the product without an extended right of control over its subsequent
use and marketing. This is because the end result of the RD process is an idea, and this idea is
then embodied in the products in which it is sold, and potentially lost on first sale. For example, a
computer program that balances a bank state- ment is first an idea, and then a specific list of
computer instructions created to effect that idea. If there is no exclusive right to control the subse-
quent marketing of the good or close facsimiles thereof, then the first purchaser of that good
would have the right to produce competitive products without expending all of the RD re-
sources required to produce it initially. The first sale of the computer code in the previous example
would enable the purchaser to make a similar program and set up in competition with the first.
This is problematic if the first seller invested years in the construction of the program while the
second only invested the few minutes and dollars required to copy it. In industries in which a
substantial amount of the value produced is at- tributable to the information it contains gener-
ated through RD, there would be no incentive to invest in this RD in the absence of the
capacity to control the marketing of its goods even after their transfer to others. Intellectual
property right regimes are analysed by economists as incentive mechanisms which give extended
rights of control over the marketing of certain goods in order to provide incentives for the infor-
mation generating investments RD that re- sulted in them Arrow, 1962; Swanson, 1995a.
There is a great variety of rights denominated ‘intellectual property’: trade marks, copy rights,
patents, plant variety rights, etc. The most impor- tant feature that all of these rights have in com-
mon is that they allow the holder to control some of the uses of the good subject to these rights e6en
after the good has left the right-holder’s possession. Thus, a person with a copyright in a book is able
to sell the book but retains the exclusive right to copy it. A person with a patent on a machine is
able to sell the machine while retaining the exclu- sive right to manufacture it. A person with a
registered plant variety certificate is able to sell that plant while retaining the exclusive right to
reproduce it for re-sale.
The function of this extended right of control is to vest the holder with an exclusive marketing
right in the particular good, usually for a limited period of years. This allows the holder to obtain a
reasonable rate of return on the book machine, plant variety or other good that is subject to the
recognised right. Note that this rate of return is only available to the extent to which users recog-
nise and enforce this right after the good has already left the possession of the right-holder. To
the extent that the other users are willing to purchase from prior purchasers, the right-holder’s
exclusive marketing right will be of little value. There is a substantial increase in the rate of return
afforded by allowing right-holders to control the uses of their rights outside of their possession.
Right-holders term the unwillingness of other users to enforce their exclusive marketing rights
‘piracy’.
Exclusive marketing rights are not required to earn a reasonable rate of return on the manufac-
ture and sale of most goods. The vast majority of goods are sold without being subject to any such
rights; the purchaser is usually within its rights to purchase the good and then commence producing
similar goods after its purchase. For example, in the U.K. the patent-intensive industries produce
only about 4.2 of GDP and the copyright-inten- sive industries produce only about 3.7 of GDP.
Most goods and services do not require any ex- tended right of control after sale; a reasonable
rate of return is acquired although all rights to use and production are transferred with the sale.
However, in those industries where the primary product is informational as in RD intensive
industries, the use of the intellectual property system is deemed to be necessary in order to
reward the production of the efficient amount of information. It is a method for inducing invest-
ments in the factors required for the RD to produce the desired information, by promising
enhanced rewards to the successful outputs from RD Swanson, 1995b.
5. Impact of a new property right regime on industry: industrial structure, industrial output and
