The commercial sale of GM Canola has raised the question of the benefits of this new technology to the seed and chemical companies, farmers, consumers, and other players in the supply chain. Previous research has suggested that the key characteristic determining whether technology of this type will provide benefits to groups other than the seed and chemical companies is whether the technology is drastic or non-drastic. An innovation is drastic if it is priced lower than the existing technology, thus completely taking over the market. An innovation is non-drastic if it is priced competitively with the existing technology.

The notions of drastic and non-drastic provide a relatively easy method of determining the distribution of benefits. The introduction of a new technology that is non-drastic will provide no real benefit to the agricultural production sector, or to other down stream sectors. Of course, non-drastic innovations may provide benefits to the firm that undertook the R&D. Drastic innovations, however, do provide benefits to the agricultural production sector and the rest of the supply chain.

The characterization of innovations as being drastic or non-drastic hinges upon the assumption that neither producers nor consumers are differentiated in any fashion. If producers and consumers are differentiated, then a different conceptual framework is required to analyze the impact of innovations such as GM canola.

This paper argues that the pricing and adoption of GM canola in Canada cannot be understood if producers are seen as being homogeneous. The paper then develops a conceptual framework in which producers are differentiated. A key finding that emerges from this framework is that while some producers will not benefit from the new technology, others will, even when the new technology co-exists with the traditional technology. Thus, the idea that producers can benefit from the technology only if the technology is 'drastic' is found to be limiting.

The paper also examines the impact of segregating GM and traditional canola in the marketing system. The segregation of canola only makes sense if consumers have a different willingness to pay for traditional canola versus GM canola. The main result of this part of the paper is that not all producers and consumers benefit from the introduction of segregation. Segregation only works if consumers and producers are differentiated in their willingness to consumer the product or to produce the product. This differentiation among consumers and producers means that only a portion of these groups will be affected by changes in the parameters that underlie the system.