After fifteen years in research and development, plant biotechnology finally entered its commercial phase in the mid-1990s. Even the optimists among biotechnology proponents have been caught off guard by its extremely fast adoption rates at the farm level. In 1999, just four years from commercial introduction, almost 50 percent of the total U.S. corn, soybean and cotton acreage were planted with transgenics. Herbicide tolerant and insect resistant crops have created significant on-farm value, mainly through cost savings from reduced insecticide and herbicide use and improved risk management in pest control, which may explain fast adoption.
The "coming of age" of plant biotechnology has triggered dramatic structural changes in the seed/biotechnology complex over the last five years. Through a wave of mergers and acquisitions, several multinational firms have emerged as leading competitors developing and marketing the early biotechnology products. In this paper, we briefly summarize the structural changes in the seed and biotechnology industries and the reasons underlying this merger/acquisition boom. Drawing on developments in evolutionary economics and transaction costs theory we discuss the connection between technological innovation and industrial structure. We conclude that the ongoing industry consolidation is a predictable phase in the innovation's lifecycle. Furthermore, we find that the consolidation has proceeded in a way that is consistent with the innovation's level of appropriability and market value.