This paper proposes that the collection of transactions, contracts and relationships being introduced in the agricultural industry to capture unique features of agricultural biotechnological innovations be collected and treated as a "firm" for purposes of exposition and analysis. No such firm exists, but a "transgenic firm" with appropriately assigned characteristics drawn from a myriad of existing inter- and intra-firm sources may serve as a useful construct upon which to base analysis of the dramatically changing world of genetic, economic, and legal innovations in agriculture.
The concept of a firm is useful in law and economics for three primary reasons: As a method of abstraction and analysis of individual economic events, as a means to study actions and consequences, and as an engine of change. Firms in the agricultural industry may be visualized as a serial set of units purchasing and selling according to their own decisions based on the market place environment.
Biotechnological innovations introduce new arrangements in transactions, contracts and relationships to capture innovations' value. Methods include pricing the product to capture the innovation or limiting the product's future use regardless of ownership. As an example, products that were transferred from one firm to another in the agricultural production chain as owned products may now have the bundle of rights associated with ownership separated. Firms within the chain sell and receive limited rights and obligations rather than a product. More relationships become vertical and the boundaries between successive firms in the chain blur.
The Paper defines a "transgenic firm" as the set of transactions, contracts and relationships relative to biotechnologically innovative product that define new inter- and intra-firm arrangements occasioned by ownership changes, property rights divisions, and limited property transfers. The inter- intra-firm dichotomy is defined by the degree to which the transactions, contracts and relationships are determined directly by the market (inter-firm) and which are determined by longer-term, more intimate, and less openly market-dependent (intra-firm) forces.
Selected theories related to the firm in law and economics are summarized and transgenic firm characteristics are contrasted and compared. Theories include the firm as a set of transactions, the firm defined by transactions costs, the modern corporation as nexus of contracts, the modern corporation modifications and other theories, the firm as a product of its environs, separation of ownership and control, and institutional contributions to firm theory.
Further research is suggested to better define the transgenic firm, determine its contributions to and embellishments of theories of the firm, its role in public policy analysis, and its utility for strategic planning purposes.